Canada: Patenting Insurance Innovations

Last Updated: September 6 2006
Article by Signe Silver

Originally published in the July/August 2006 issue of Canadian Insurance

The Emergence of Software and Business Method Patents Has Marked a Shift in the Competitive Landscape for a Number of Industries, Including Insurance.

In recent years, there has been a significant increase in patent filings for innovations relating to the financial services and insurance industry. This is driven in part by developments in patent law that have enabled software and business processes to be patented, but also in part by the Internet age and the development and adoption of technological solutions to client needs.

Business Method Patents

It was previously believed that an innovation needed to be technical in some way in order to be patentable. Methods of doing business were not considered to meet this criterion. This belief changed, however, when in 1998 the U.S. Federal Court validated business methods as acceptable patentable subject matter in the case of Signature Financial Group v. State Street Bank and Trust.

The patent in this case involved a system for implementing an investment structure for the administration and accounting of mutual funds, which allowed mutual fund companies to pool assets in an investment portfolio, providing economies of scale with regard to costs. The Court held that a practical application, such as the one claimed by Signature, was appropriate subject matter for a patent as long as it produced "a useful, concrete and tangible result" — in this case a final share price.

Other decisions have continued to expand the scope of business-method patents in the United States. For example, in Ex Parte Lundgren, a method for calculating managerial compensation to reduce the incentive for collusion in an industry was found to be patentable. The U.S. Patent and Trademark Office (USPTO) made it clear that an invention does not need to be in the "technical arts," as had previously been thought, to constitute patentable subject matter.

Canada, Europe and other important jurisdictions tend to be stricter on what they consider to be patentable, but it is generally accepted that software-related innovations that have a "technical effect" are patentable and that business methods may also be patentable, at least in Canada, in certain circumstances. For this reason we are seeing patent applications for software and business method innovations in the insurance industry being filed in Canada and many other jurisdictions outside the U.S.

The emergence of software and business method patents has marked a shift in the competitive landscape for a number of industries. In the financial services industry, for example, there was an aggressive patent-filing blitz for financial-servicerelated innovations after State Street was released. Many financial institutions, including Bank of America, Wachovia Corp. and Citigroup, now have their own full-time IP counsel. This trend has also been noticed in the insurance industry, although not yet to the same extent.

Patents in the Insurance Industry

Breaking Ground

One insurance-related patent that has caught the attention of the insurance industry is the one owned by Bancorp Services (U.S. Patent Number 5,926,792). This patent relates to a stablevalue- protected investment system that provides a mechanism for stabilizing the reported value of a life insurance policy by arranging for a third party to guarantee a particular value for the policy should it need to be paid out prematurely.

This patent came to the forefront when, in January 2000, Bancorp filed suit against Hartford Life Insurance Co. for patent infringement. In 2004, this patent was found to be valid by the Court of Appeals of the Federal Circuit in the United States, and shortly thereafter Hartford settled with Bancorp for $80 million. Lawsuits involving the same patent are still being pursued against Sun Life Assurance and Metropolitan Life Insurance.

Another example of a new insurance product that has been successfully patented in the U.S. is telematic auto insurance, first patented by Progressive Casualty Insurance in August 1998. The basic idea behind this invention is to base an insured’s premiums on data obtained by directly monitoring the driver’s behaviour through means such as the use of GPS technology. A driver who drives longer distances or at higher speeds than a more infrequent or more cautious driver will have higher premiums. While Progressive decided not to implement the product itself, it was able to profit from its invention by licensing it to Norwich Union, which used it to develop the "Pay As You Drive" (PAYD) auto insurance product.

Who is patenting these inventions? GE, AIG, Swiss Re and a number of other notable companies in the insurance and reinsurance industry are adopting patent policies and infrastructure to better manage their intellectual property and IP risk in view of the developments mentioned earlier, and are in the early stages of building international patent portfolios. AIG, for example, has at least 16 published patents and patent applications listed in international patent databases, and Swiss Re has at least 39.

Patent applications are also being filed by lesser known companies or by entrepreneurs who are seeking to earn revenues by licensing their patents. Some companies (sometimes referred to as "patent trolls") have built up successful businesses solely on the basis of licensing patents.

A patent troll will typically have few assets other than the patents it owns and will normally conduct no business besides litigation against those who refuse its offers to license. These latter companies often surprise an industry by securing patents to core technologies — for example, Ronald Katz for automated telephony system technologies or DataTreasury for electronic payment processing technologies.

Advantages of Payment Protection

Why are firms going down this path? There are numerous advantages for a company to patent its own products. First, patenting a product enables the owner of that patent to determine how the product will be released. A company with a new innovation can decide to corner the market and make exclusive use of the product or it can license it to other companies and collect fees.

A solid patent portfolio can also serve as both a bargaining chip and a defence mechanism. As a bargaining chip, licences for patented products may be traded with competitors in return for corresponding licences for products of interest or for other considerations. As a defence mechanism, a solid patent portfolio can act as a deterrent against patent infringement suits from other institutions. A competitor may be less likely to try to sue for an alleged infringement of its patent rights if it thinks it may have to deal with a counter- suit based on one or more of the potential defendant’s patents.

Steps for Implementing a Patent Strategy


There are a number of preliminary steps that a company may pursue when contemplating whether a patent strategy is appropriate for its business. First, consider how much is currently being spent on research and development (this information may be easily identified if Scientific Research and Experimental Development credits are being claimed). Patents are often viewed as a form of insurance or security for such R&D investments.

Next, investigate what patents are being filed by others for insurance-related innovations. Basic patent searches can now be conducted online (for instance, at for U.S. patents) and more thorough searches can be undertaken through an experienced patent attorney or searcher. These searches, which can be carried out by company name or by subject matter, can provide useful insight into what your competitors as well as potential trolls are seeking in the way of patent protection. If substantial sums are being invested in R&D or if competitors or potential patent trolls are filing patents that are relevant to your business, you should seriously consider adopting a patent strategy.

A patent strategy is, of course, just a subset of an overall IP protection and risk management strategy that a company should consider adopting. It is important to align an IP policy and strategy with the company’s business strategy and culture. In the absence of such policies, because of the invisible, intangible nature of IP and the importance of filing applications in a timely fashion, a company just might be missing out on valuable revenue-generating or riskmanagement opportunities.

Examples of Patents and Applications

  • US 6,772,128, "Nuclear Decommissioning Insurance Financial Product and Method," American International Group, Inc.
  • WO 02/35758, "Risk Insurance Financial Product and Method," American International Group, Inc.
  • US 6,275,807, "Computer System and Methods for Allocation of the Returns of a Portfolio Among a Plurality of Investors with Different Risk Tolerance Levels and Allocation of Returns from an Efficient Portfolio," Metropolitan Life Insurance Co.
  • WO 2005/017701, "Method and Apparatus for Automated Insurance Processing," Swiss Reinsurance Co.
  • WO 2006/002687, "Method and System for Automated Location-Dependent Recognition of Flood Risks," Swiss Reinsurance Co.
  • US 6,868,386, "Monitoring System for Determining and Communicating a Cost of Insurance," Progressive Casualty Insurance Co.
  • CA 2,494,638 , "Monitoring System for Determining and Communicating a Cost of Insurance," Prudential Casualty Insurance Co.
  • US 2004/153346, "Remote Contents Estimating System and Method," Allstate Insurance Co.
  • CA 2,396,827, "Method of Generating Insurance Business by Providing an onsite Underwriter," Reliant American Insurance Co.
  • US 2003/208385, "System and Method for Underwriting Insurance," North America Insurance Corp.
  • US 6,869,362, "Method and Apparatus for Providing Insurance Policies for Gambling Losses," Walker Digital, LLC
  • WO 03/060791, "Process for Case-based Insurance Underwriting Suitable for use by an Automated System," GE Financial Assurance Holding.

Robin Coster, a partner at Torys LLP, has more than 16 years of experience practicing in all areas of intellectual property law. His practice focuses on strategic planning and management of patents, trademarks and other IP assets, and he is regularly involved in advising companies on strategies for protecting and exploiting IP assets and in assessing the IP portfolios of competitors, potential acquisitions and licensors. Signe Silver was an articling student at Torys.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions