The monetizing of intellectual property, in general, and patents, in particular, has long been a subject of interest.  Certainly, patent trolls, the subject of this issue’s feature story,  have found their own unique way to monetize the patents they own.  But, for the rest of us, this concept may be just an interesting option we might one day consider.  Perhaps that day was yesterday?

Some insurance companies are just now beginning to realize the value of their intellectual capital – the creative spirit of the people who, together, comprise their company.  Insurance products are not like products in manufacturing industries in that they have no material substance.  They are, essentially, promises as are the products in the broader financial services industry.  However, they can and do involve creative, innovative, and valuable new business processes that add value to the company.

Many years ago in the insurance industry, competition was such that all it took to be successful and profitable was a moderate degree of competence.  In fact, some may have said that it took intentional mismanagement to lose money.  Then, of course, a lot of advantages insurance companies had come to enjoy – decreasing taxes, expense reduction due to computer efficiencies, improving mortality, etc. bit the dust.  Competition became uglier as profit margins and margins, in general, disappeared. New sources of profitability had to be found.

We have argued that intellectual property has value long ignored in the insurance industry.  Failing to protect intellectual property that is created in an organization is bad in that it forgoes an opportunity to realize value which can be used to add to profit.  In a more competitive insurance market where margins are shrinking no potential value should be ignored. 

While programs that capture value through patent protection are good, programs which create additional value through effective use of those patents are even better.  Profit centers that use a company’s patent portfolio to create cash-flow through licensing arrangements are what’s meant by monetizing patents.  Insurance companies (or any company for that matter) that do not consider use of its intellectual assets in this way may be accused of wasting corporate assets.