The insurance industry has long been one in which new product ideas and concepts, policy illustration approaches, and underwriting processes were freely shared either by exposure in the marketplace or at industry and professional meetings. There were a few front runners who recognized that the insurance business methods they invented which enabled new product designs could be patented. And then in July, 1998 the Federal Circuit Court of Appeals in its State Street Bank vs. Signature Financial decision clearly made the statement that business methods are patentable. In fact the court emphasized that they always have been.

With this decision interest in business method patents surged. So, even though there were notable insurance oriented business method patents issued prior to the decision, their numbers have increased. And, although business method patents in the insurance industry make up a very small part of the total patents applied for or issued, they can still have a significant impact because they change the way innovation and invention in the insurance industry is now viewed. You may find the neighborhood to be no longer as friendly as it once was.

Every insurer would be well advised to establish a "patent watch". A patent watch is a program through which insures monitor new patents and patent applications as they are published. The relevance of these to the insurer's current products and new products on the drawing board ought to be determined. This is particularly important in an industry where the successful new product introductions of others were routinely copied. One purpose of a patent watch is to provide information useful in formulating new product designs so they don't infringe on the protected intellectual property of others.

Alternatively, of course, discovery of new ideas through a patent watch program may result in useful new product ideas that your company can license and easily implement because product design, development, pricing, legal, regulatory, and marketing ground work has already been done. Also, since patents are meant to stimulate additional invention, your company may be inspired to find different or better solutions to the problems addressed by the patents found.

For example, so far in 2004 (through 5/25/04) in the U. S. ten patents have been issued in patent class 705/4, a class used by the USPTO to designate insurance business methods inventions. During the same period (approximately the first five months of 2004) 70 patent applications have been published in that class. However, since patent applications are not published until 18 months after they are filed, there is an 18 month backlog of patent applications which are not yet public. Given the rate at which patent applications are filed in class 705/4, this means that there are currently, approximately, 130 yet to be published in 2004. Currently there are 392 published patent applications pending. We estimate that there are currently close to 500 published plus unpublished insurance business method patents pending in class 705/4.

These patents and patent applications cover innovations in all insurance lines of business: life, annuity, health, and property & casualty. Some are broad, some are narrow in focus. Other patent classes may contain patented innovations applicable in the insurance industry so one should not limit a search to just class 705/4. Issued patents covering areas in which you are currently practicing would be an immediate concern. However, pending applications are important only if a patent is actually issued.