Method and apparatus for insuring the funding of a future liability of uncertain cost

Abstract

A method and apparatus are provided to insure a means of purchasing a floating rate zero coupon note that is designed to fund a certain future liability of uncertain value and thereby defease fully its future cost. The method is a one-year renewable term insurance program that fully funds the purchase of a certain floating rate zero coupon note upon the occurrence of some catastrophic event, such as the death of the insured. The system projects the expected death benefit payment and then calculates the annual insurance premium based on the expected death benefit payment, type of policy, and personal and risk characteristics of the insured.

Claims

What is claimed is:

1. A data processing system for administering an insurance program to insure, upon the death of a prospective purchaser of a floating rate zero coupon note, the availability of financial means for purchasing the floating rate zero coupon note, said note being issued by an issuer and designed to fully fund a future liability whose projected due date and whose present cost are known but whose future cost is unknown but can be projected with some risk factor, said system comprising:

means for issuing into a floating rate zero coupon note purchase insurance account a periodically renewable term life insurance policy to insure the availability of financial means to purchase a floating rate zero coupon note having a scheduled maturity date to fund the purchase of a particular service or commodity, each said prospective purchaser holding at least one policy in said floating rate zero coupon note purchase insurance account;

account list means for storing an account list of current information for each floating rate zero coupon note purchase insurance account into which said issuing means has issued a policy;

means for entering insurance purchase, periodic premium payment, and death benefit payment request data and customer inquiries;

means responsive to said entering means and operating on said account list means for processing periodically said insurance purchase, periodic premium payment, and death benefit payment request data to update said account list;

means responsive to a death benefit payment request entered through said entering means for calculating the amount of the death benefit payable upon the death of the insured to at least one designated beneficiary account;

means responsive to said issuing means for establishing the schedule of periodic premiums to be charged for said insurance based on a projected death benefit payment, type of life insurance policy selected, sex of the insured, age of the insured, and risk profile of the insured wherein the projected death benefit payment under said life insurance policy is determined on the basis of maturity of the floating rate zero coupon note cost of the service or commodity at time of purchase, current and forecasted future rate of escalation in the cost of the service or commodity, current and forecasted general inflation rates, projected yields available on investment instruments, the floating rate zero coupon note issuer's risk premium, and the floating rate zero coupon note issuer's target profit margin, said schedule including a premium payment grace period;

means for drawing automatic premium loans to make a premium payment at the end of the premium payment grace period;

asset position list means for storing an asset position list of current information concerning a portfolio of investments purchased with insurance policy premiums and interim investment cash flows;

portfolio management means for selecting portfolio of securities and updating said asset position list periodically, based on an amount of cash that is available for investment, current composition of the asset portfolio, projected cash need for the following period, projected aggregate floating rate zero coupon note purchase insurance liability schedule, and predefined portfolio selection criteria, in order to generate a stream of cash flows from the asset portfolio that will be sufficient to cover in full in a timely manner the cost of meeting death benefit payment obligations;

means for recording the selected security purchase and sale transaction data to update the asset position list;

management reporting means responsive to said issuing means, said account list means, said entering means, said processing means, said portfolio management means and said recording means for periodically generating a report including a summary of insurance purchases, periodic premium payments, and death benefit payment transactions, asset and liability position, and investment performance;

investor billing and reporting means responsive to said schedule establishing means and said account list means for sending policy holders periodic premium notices and status reports of their accounts; and

transaction and inquiry reporting means responsive to said entering means, said account list means, said schedule establishing means and said investor billing and reporting means for confirming individual transactions and responding to inquiries from customers.

2. The data processing system of claim 1, wherein said death benefit calculating means comprises:

means for compiling a list of all the floating rate zero coupon note purchase insurance policies in an account on which a death benefit payment request has been made;

means responsive to said compiling means for determining which type of life insurance policy each policy in said account is;

means for determining whether the death of each insured has been verified;

means responsive to said policy type determining means and said death verification determining means for determining the amount of death benefit payable under each policy for which the death of each insured has been verified; and

means responsive to said compiling means and said amount determining means for determining aggregate death benefit papable under at such policies pn a particular account.

3. Processing system of claim 1, wherein said automatic premium loan drawing means comprises:

means for determining when the end of the premium payment grace period under any particular policy has occurred;

means for determining whether underlying beneficiary floating rate zero coupon note accounts contain sufficient accrued interest to pay the remaining balance of the premium due in full or to make a partial premium payment;

means responsive to said grace period end determining means and said accrued interest sufficiency determining means for calculating the fractional period over which the policy can be extended by utilizing the available accrued interest to pay all or a portion of the periodic premium; and

means responsive to said fractional period calculating means for determining aggregate daily automatic premium loans.

4. The data processing system of claim 1, wherein said periodic premium schedule establishing means comprises:

means for determining a future value escalation rate based on information concerning at least the projected rate of change of the cost of the service or commodity;

means for determining a present value discount rate by subtracting an insurer's risk premium rate and a target profit margin from investment yield obtainable upon investment of funds received from the sale of said floating rate zero coupon note purchase insurance policies and reinvestment of any interim cash flows;

means responsive to said determined future value esculation rate and said determined present value discount rate for calculating a projected death benefit payment by compounding the current cost of the service or commodity over the life of the floating rate zero coupon note to be purchased with the death benefit payment at said future value escalation rate and discounting at said present value discount rate; and

means responsive to said projected death benefit for determining a periodic premium on any particular floating rate zero coupon note purchase insurance policy based o the projected death benefit payment, the type of life insurance policy, the sex of each insured, the age of each insured, and the risk profile of each insured.

5. The data processing system of claim 1, wherein said portfolio management and updating means comprises:

means for determining a schedule of projected insurance liabilities based on an aggregate insurance schedule and actuarial data regarding likelihood of death occurring prior to the expiration of the paid-up term of each life insurance policy in said schedule;

means responsive to said asset position list means for determining the amount of funds available for investment based on the amount of cash on hand and the current market value of the asset portfolio;

means responsive to said liability schedule determining means for calculating a composite cost of the insurance liabilities; and

means responsive to the schedule of projected insurance liabilities, amount of funds available for investment, schedule of yields currently available for investment, and the current composition of the asset portfolio for selecting securities to be purchased or sold, for calculating a yield on the asset portfolio and for evaluating the effect of the selected purchases or sales on the portfolio in order to reject any selection that would result in a yield on the portfolio that is less than the composite cost of the insurance liabilities and in order to reject also any selection that would result in a projected income stream for which the projected cash availability for any period is less than the projected death benefit payment liability for said period.

6. Processing system of claim 1, wherein said investor billing and reporting means comprises:

means

means responsive to said account list for determining when a policy holder should be sent [an annual a periodic premium notice;

means responsive to said account and said entering means for adjusting the amount of coverage a floating rate zero coupon note purchase insurance policy provides based on the number of floating rate zero coupon notes of each maturity the policy beneficiary would ultimately like to own and the respective numbers of floating rate zero coupon notes owned by at least one of the beneficiary and another holding on the beneficiary's behalf;

means responsive to said schedule establishing means a said premium notice sending determination means for determining a premium due on each policy on which a premium notice is to be sent; and

means responsive to said due premium determining

determining an aggregate premium balance owed by each account holder who is to be sent a premium notice.

7. Method for administering an insurance program to insure, upon the death of a prospective purchaser of a floating rate zero coupon note, the availability of financial means for purchasing the floating rate zero coupon note, said note being issued by an issuer and designed to fully fund a future liability whose projected due date and whose present cost are known but whose future cost is unknown but can be projected with some risk factor, said method comprising the steps of:

issuing into a floating rate zero coupon note purchase insurance account a periodically renewable term life insurance policy to insure the availability of financial means to purchase a floating rate zero coupon note having a scheduled maturity date to fund the purchase of a particular service or commodity, each said prospective purchaser holding at least one policy in said floating rate zero coupon note purchase insurance account;

maintaining an account list of current information for each floating rate zero coupon note purchase insurance account into which a policy has been issued;

entering insurance purchase, periodic premium payment, and death benefit payment request data and customer inquiries into a data processing system;

responsive to said data entry and operating on said account list, processing periodically said insurance purchase, periodic premium payment, and death benefit payment request data to update said account list;

responsive to an entered death benefit payment request, ca . the amount of the death benefit payable upon the death of the insured to at least one designate beneficiary account;

establishing responsive to said issuing step the schedule of periodic premiums to be charged for said insurance based on a projected death benefit payment, type of life insurance policy selected, sex of the insured, age of the insured, and risk profile of the insured wherein the projected death benefit payment under said life insurance policy is determined on the basis of maturity of the floating rate zero coupon note, cost of the service or commodity at the time of purchase, current and forecasted future rate of escalation in the cost of the service or commodity, current and forecasted general inflation rates, projected yields available on investment instruments, the floating rate zero coupon note issuer's risk premium, and the floating rate zero coupon note issuer's target profit margin, said schedule including a premium payment grace period;

drawing automatic premium loans to make a premium payment at the end of the premium payment grace period;

maintaining an asset position list of current information concerning a portfolio of investments purchased with insurance policy premiums and interim investment cash flows;

selecting a portfolio of securities and update said asset position list periodically, based on an amount of cash that is available for investment, current composition of the asset portfolio, projected cash need for the following period, projected aggregate floating rate zero coupon note purchase insurance liability schedule, and predefined portfolio selection criteria, thereby generating a stream of cash flows from the asset portfolio that will be sufficient to cover in full in a timely manner the cost of meeting the death benefit payment obligations;

recording the selected security purchase and sale transaction data to update the asset position list;

responsive to said issuing step, said account list main step, said entering step, said processing step, said selecting and updating step, and said recording step, periodically generating a report including a summary of insurance purchase, periodic premium payment, and death benefit payment transactions, asset and liability position, and investment performance;

have to said schedule establishing step and said account list maintaining step, sending policy holders periodic premium notices and status reports of their accounts; and

responsive to said entering step, said account list mail step, said schedule establishing step and said sending step, confirming individual transactions and responding to inquiries from customers.

8. The data processing method of claim 7, wherein said death benefit calculating step comprises:

compiling a list of all floating rate zero coupon note purchase insurance policies in an account on which a death benefit payment request has been made;

responsive to said compiling step, determining which type of life insurance policy each policy in said account is;

determining whether the death of each insured verified;

responsive to said policy type determining step an said death verification determining step, determining the amount of death benefit payable under each policy for which the death of each insured has been verified; and

responsive to said compiling step and said amount determining step, determining an aggregate death benefit payable under all such policies in a particular account.

9. The data processing method of claim 7, wherein said automatic premium loan drawing step comprises:

determining when the end of the premium payment grace period under any particular policy has occurred;

determining whether underlying beneficiary floating rate zero coupon note accounts contain sufficient accrued interest to pay the remaining balance of the premium due in full or to make a partial premium payment;

responsive to said grace period end determining step and accrued interest sufficiency determining step, calculating the fractional period over which the policy can be extended by utilizing the available accrued interest to pay all or a portion of the periodic premium; and

responsive to said fractional period calculating step, determining aggregate daily automatic premium loans.

10. The data processing method of claim 7, wherein said periodic premium schedule establishing step comprises:

determining a future value escalation rate based on information concerning at least the projected rate of change of the cost of the service or commodity;

determining a present value discount rate by subtracting an insurer's risk premium rate and a target profit margin from investment yield obtainable upon investment of funds received from sale of said floating rate zero coupon note purchase insurance policies and reinvestment of any interim cash flows;

responsive to said determined future value escalation rate and said determined present value discount rate, calculating a projected death benefit payment by compounding the current cost of the service or commodity over the life of the floating rate zero coupon note to be purchased with the death benefit payment at said future value escalation rate and discounting at said present value discount rate; and

responsive to said projected death benefit, determining a periodic premium on any particular floating rate zero coupon note purchase insurance policy based on the projected death benefit payment, the type of life insurance policy, the sex of each insured, the age of each insured, and the risk profile of each insured.

11. The data processing method of claim 7, wherein said portfolio selecting and updating step comprises:

determining a schedule of projected insurance liabilities based on an aggregate insurance schedule and actuarial data regarding likelihood of death occurring prior to the expiration of the paid-up term of each life insurance policy in said schedule;

responsive to said asset position list maintaining means, determining the amount of funds available for investment based on the amount of cash on hand and the current market value of the asset portfolio;

responsive to said determined liability schedule, calculating a composite cost of the insurance liabilities; and

responsive to the schedule of projected insurance liabilities, amount of funds available for investment, schedule of yields currently available for investment, and the current composition of the asset portfolio, selecting securities to be purchased or sold, calculating a yield on the asset portfolio and evaluating the effect of the selected purchases or sales on the portfolio, rejecting any selection that would result in a yield on the portfolio that is less than the composite cost of the insurance liabilities and rejecting also any selection that would result in a projected income stream for which the projected cash availability for any period is less than the projected death benefit payment liability for said period.

12. Data processing method of claim 7, wherein said policy holder periodic premium notice and report sending step comprises:

responsive to said maintained account list, determining when a policy holder should be sent a periodic premium notice;

responsive to said account list maintaining step an said entering step, adjusting the amount of coverage a floating rate zero coupon note purchase insurance policy provides based on the number of floating rate zero coupon notes of each maturity the policy beneficiary would ultimately like to own and the respective numbers of floating rate zero coupon notes owned by at least one of the beneficiary and another holding on the beneficiary's behalf;

responsive to said established schedule and said premium notice sending determination, determining a premium due on each policy on which a premium notice is to be sent; and

responsive to said due premium determination, determining an aggregate premium balance owed by each account holder who is to be sent a premium notice.

13. A data processing system for administering an insurance program to insure, upon the death of a prospective purchaser of a floating rate zero coupon note, the availability of financial means for purchasing the floating rate zero coupon note, said note being issued by an issuer and designed to fully fund a future liability whose projected due date and whose present cost are known but whose future cost is unknown but can be projected with some risk factor, said system comprising:

means for issuing into a floating rate zero coupon note purchase insurance account a periodically renewable term life insurance policy to insure the availability of financial means to purchase a floating rate zero coupon note having a scheduled maturity date to fund the purchase of a particular service or commodity, each said prospective purchaser holding at least one policy in said floating rate zero coupon note purchase insurance account;

account list means for storing an account list of current information for each floating rate zero coupon note purchase insurance account into which said issuing means has issued a policy;

means for entering insurance purchase, periodic premium payment, and death benefit payment request data and customer inquiries;

means responsive to said entering means and operating on said account list means for processing periodically said insurance purchase, periodic premium payment, and death benefit payment request data to update said account list;

means responsive to a death benefit payment request en through said entering means for calculating the amount of the death benefit payable upon the death of the insured to at least one designated beneficiary account;

means responsive to said issuing means for establishing the schedule of periodic premiums to be charged for said insurance based on a projected death benefit payment and type of life insurance selected, wherein the projected death benefit payment under said life insurance policy is determined on the basis of maturity of the floating rate zero coupon note, cost of the service or Commodity at time of purchase, the floating rate zero coupon note issuer's risk premium, and the floating rate zero coupon note issuer's target profit margin, said schedule including a premium payment race period;

means for drawing automatic premium loans to make a payment at the end of the premium payment race period;

asset position list means for storing an asset position of current information Concerning a portfolio of investments purchased with insurance policy premiums and interim investment cash flows;

portfolio management means for selecting a portfolio of securities and updating said asset position list periodically, based on an amount of cash that is available for investment current composition of the asset portfolio, projected cash need for the following period, projected aggregate floating rate zero coupon note purchase insurance liability schedule, and predefined portfolio selection criteria, in order to generate a stream of cash flows from the asset portfolio that will be sufficient to Cover in full in a timely manner the cost of meeting death benefit payment obligations;

means for recording the selected security purchase an transaction data to update the asset position list;

management reporting means responsive to said issuing means, said account list means, said entering means, said processing means, said portfolio management means and said recording means for periodically generating a report including a summary of insurance purchases, periodic premium payments, and death benefit payment transactions, asset and liability position, and investment performance;

investor billing and reporting means responsive to said s establishing means and said account list means for sending policy holders periodic premium notices and status reports of their accounts; and

transaction and inquiry reporting means responsive to said entering means, said account list means, said schedule establishing means and said investor billing and reporting means for confirming individual transactions and responding to inquiries from customers.

14. The data processing system of claim 13, wherein:

said schedule of periodic premiums is further based on sex of the insured, age of the insured, and risk profile of the insured; and

said projected death benefit payment is further based on current and forecasted future rate of escalation in the cost of the service or commodity, current and forecasted general inflation rates, and projected yields available on investment instruments.

15. The data processing system of claim 13, wherein said death benefit calculating means comprises:

means for compiling a list of all the floating rate zero coupon note purchase insurance policies in an account on which a death benefit payment request has been made;

means responsive to said compiling means for determining which type of life insurance policy each policy in said account is;

means for determining whether the death of each insured has been verified;

means responsive to said policy type determining means and said death verification determining means for determining the amount of death benefit payable under each policy for which the death of each insured has been verified; and

means responsive to said compiling means and said amount determining means for determining aggregate death benefit payable under all such policies in a particular account.

16. The data processing system of claim 13, wherein said automatic premium loan drawing means comprises:

means for determining when the end of the premium payment grace period under any particular policy has occurred;

means for determining whether underlying beneficiary floating rate zero coupon note accounts contain sufficient accrued interest to pay the remaining balance of the premium due in full or to make a partial premium payment;

means responsive to said grace period end determining means and said accrued interest sufficiency determining means for calculating the fractional period over which the policy can be extended by utilizing the available accrued interest to pay all or a portion of the periodic premium; and

means responsive to said fractional period calculating means for determining aggregate daily automatic premium loans

17. The data processing system of claim 13, wherein said periodic premium schedule establishing means comprises:

means for determining a future value escalation rate based on information concerning the projected rate of change of the cost of the service or commodity;

means for determining a present value discount rate by an insurer's risk premium rate and a target profit margin from investment yield obtainable upon investment of funds received from the sale of said floating rate zero coupon note purchase insurance policies and reinvestment of any interim cash flows;

means responsive to said determined future value escalation rate and said determined present value discount rate for calculating a projected death benefit payment by compounding the current cost of the service or commodity over the life of the floating rate zero coupon note to be purchased with the death benefit payment at said future value escalation rate and discounting at said present value discount rate; and

means responsive to said projected death benefit for determining a periodic premium on any particular floating rate zero coupon note purchase insurance policy based on the projected death benefit payment and the type of life insurance policy.

18. The data processing system of claim 17, wherein said periodic premium determining means further bases said periodic premium on the sex of each insured, the age of each insured, and the risk profile of each insured.

19. The data processing system of claim 13, wherein said portfolio management and updating means comprises:

means for determining a schedule of projected insurance liabilities based on an aggregate insurance schedule and actuarial data regarding likelihood of death occurring prior to the expiration of the paid-up term of each life insurance policy in said schedule;

means responsive to said asset position list means for determining the amount of funds available for investment based on the amount of cash on hand and the current market value of the asset portfolio;

means responsive to said liability schedule determining means for calculating a composite cost of the insurance liabilities; and

means responsive to the schedule of projected insurance liabilities, amount of funds available for investment, projected interest rates, schedule of yields currently available for investment, and the current composition of the asset portfolio for selecting securities to be purchased or sold, for calculating a yield on the asset portfolio, and for evaluating the effect of the selected purchases or sales on the portfolio in order to reject any selection that would result in a yield on the portfolio that is less than the composite cost of the insurance liabilities and in order to reject also any selection that would result in a projected income stream for which the projected cash availability for any period is less than the projected death benefit payment liability for said period.

20. The data processing system of claim 13, wherein said investor billing and reporting means comprises:

means responsive to said account list means for when a policy holder should be sent a periodic premium notice;

means responsive to said account list means and said entering means for adjusting the amount of coverage a floating rate zero coupon note purchase insurance policy provides based on the number of floating rate zero coupon notes of each maturity the policy beneficiary would ultimately like to own and the respective numbers of floating rate zero coupon notes owned by at least one of the beneficiary and another holding on the beneficiary's behalf;

means responsive to said schedule establishing means an said premium notice sending determination means for determining a premium due on each policy on which a premium notice is to be sent; and

means responsive to said due premium determining means for determining an aggregate premium balance owed by each account- holder who is to be sent a premium notice.

21. A data processing method for administering an insurance program to insure, upon the death of a prospective purchaser of a floating rate zero coupon note, the availability of financial means for purchasing the floating rate zero coupon note, said note being issued by an issuer and designed to fully fund a future liability whose projected due date and whose present cost are known but whose future cost is unknown but can be projected with some risk factor, said method comprising the steps of:

issuing into a floating rate zero coupon note purchase insurance account a periodically renewable term life insurance policy to insure the availability of financial means to purchase a floating rate zero coupon note having a scheduled maturity date to fund the purchase of a particular service or commodity, each said prospective purchaser holding at least one policy in said floating rate zero coupon note purchase insurance account;

maintaining an account list of current information for each floating rate zero coupon note purchase insurance account into which a policy has been issued;

entering insurance purchase, periodic premium payment, death benefit payment request data and customer inquiries into a data processing system;

responsive to said data entry and operating on said account list, processing periodically said insurance purchase, periodic premium payment, and death benefit payment request data to update said account list;

responsive to an entered death benefit payment calculating the amount of the death benefit payable upon the death of the insured to at least one designated beneficiary account;

establishing responsive to said issuing step the schedule of periodic premiums to be charged for said insurance based on a projected death benefit payment and type of life insurance policy selected, wherein the projected death benefit payment under said life insurance policy is determined on the basis of maturity of the floating rate zero coupon note, cost of the service or commodity at the time of purchase, the floating rate zero coupon note issuer's risk premium, and the floating rate zero coupon note issuer's target profit margin, said schedule including a premium payment grace period;

drawing automatic premium loans to make a premium payment at the end of the premium payment grace period;

maintaining an asset position list of current information concerning a portfolio of investments purchased with insurance policy premiums and interim investment cash flows;

selecting a portfolio of securities and updating said asset position list periodically, based on an amount of cash that is available for investment, current composition of the asset portfolio, projected cash need for the following period, projected aggregate floating rate zero coupon note purchase insurance liability schedule, and predefined portfolio selection criteria, thereby generating a stream of cash flows from the asset portfolio that will be sufficient to cover in full in a timely manner the cost of meeting the death benefit payment obligations;

recording the selected security purchase and sale transaction data to update the asset position list;

responsive to said issuing step, said account list maintaining step, said entering step, said processing step, said selecting and updating step, and said recording step, periodically generating a report including a summary of insurance purchase, periodic premium payment, and death benefit payment transactions, asset and liability position, and investment performance;

responsive to said schedule establishing step and said account list maintaining step, sending policy holders periodic premium notices and status reports of their accounts; and

responsive to said entering step, said account list main step said schedule establishing and step and said sending step, confirming individual transactions and responding to inquiries from customers.

22. The data processing method of claim 21, wherein:

said schedule of periodic premiums is further based on sex of the insured, age of the insured, and risk profile of the insured; and

said projected death benefit payment is further based on current and forecasted future rate of escalation casted general inflation rates, and projected yields available on investment instruments.

23. The data processing method of claim 21, wherein said death benefit calculating step comprises:

compiling a list of all floating rate zero coupon note purchase insurance policies in an account on which a death benefit payment request has been made;

responsive to said compiling step, determining which type of life insurance policy each policy in said account is;

determining whether the death of each insured has been verified;

responsive to said policy type determining step and said death verification determining step, determining the amount of death benefit payable under each policy for which the death f each insured has been verified; and

responsive to said compiling step and said amount determining step, determining an aggregate death benefit payable under all such policies in a particular account.

24. The data processing method of claim 21, wherein said automatic premium loan drawing step comprises:

determining when the end of the premium payment grace period under any particular policy has occurred;

determining whether underlying beneficiary floating zero coupon note accounts contain sufficient accrued interest to pay the remaining balance of the premium due in full or to make a partial premium payment;

responsive to said grace period end determining step and said accrued interest sufficiency determining step, calculating the fractional period over which the policy can be extended by utilizing the available accrued interest to pay all or a portion of the periodic premium; and

responsive to said fractional period calculating step aggregate daily automatic premium loans.

25. The data processing method of claim 21, wherein said periodic premium schedule establishing step comprises:

determining a future value escalation rate based on information concerning at least the projected rate of change of the cost of the service or commodity;

determining a present value discount rate by subtracting an insurer's risk premium rate and a target profit margin from investment yield obtainable upon investment of funds received from sale of said floating rate zero coupon note purchase insurance policies and reinvestment of any interim cash flows;

responsive to said determined future value escalation rate and said determined present value discount rate, calculating a projected death benefit payment by compounding the current cost of the service or commodity over the life of the floating rate zero coupon note to be purchased with the death benefit payment at said future value escalation rate and discounting at said present value discount rate; and

responsive to said projected death benefit, determining a periodic premium on any particular floating rate zero coupon note purchase insurance policy based on the projected death benefit payment and the type of life insurance policy.

26. The data processing method of claim 25 wherein insured, the age of each insured, and the risk profile of each insured.

27. The data processing method of claim 21, wherein said portfolio selecting and updating step comprises:

determining a schedule of projected insurance liabilities based on an aggregate insurance schedule and actuarial data regarding likelihood of death occurring prior to the expiration of the said-up term of each life insurance policy in said schedule;

responsive to said asset position list maintaining means, determining the amount of funds available for investment based on the amount of cash on hand and the current market value of the asset portfolio;

responsive to said determined liability schedule, calculating a composite cost of the insurance liabilities; and

responsive to the schedule of projected insurance liabilities, amount of funds available for investment, projected interest rates, schedule of yields currently available for investment, and the current composition of the asset portfolio, selecting securities to be purchased or sold, calculating a yield on the asset portfolio, and evaluating the effect of the selected purchases or sales on the portfolio, rejecting any selection that would result in a yield on the portfolio that is less than the composite cost of the insurance liabilities and rejecting also any selection that would result in a projected income stream for which the projected ash availability for any period is less than the projected death benefit payment liability for said period.

28. The data processing method of claim 21, wherein said policy holder periodic premium notice and report sending step comprises:

responsive to said maintained account list, determining when a policy holder should be sent a periodic premium notice;

responsive to said account list maintaining step and said entering step, adjusting the amount of coverage a floating rate zero coupon note purchase insurance policy provides based on the number of floating rate zero coupon notes of each maturity the policy beneficiary would ultimately like to own and the respective numbers of floating rate zero coupon notes owned by at least one of the beneficiary and another holding on the beneficiary's behalf;

responsive to said established schedule and said premium notice sending determination, determining a premium due on each policy on which a premium notice is to be sent; and

responsive to said due premium determination, determining an aggregate premium balance owed by each account holder who is to be sent a premium notice.

29. A data processing system for administering an insurance program to insure, upon the death of a prospective purchaser of a floating rate zero coupon note, the availability of financial means for purchasing the floating rate zero coupon note, said note being issued by an issuer and designed to fully fund a future liability whose projected due date and whose present cost are known but whose future cost is unknown but can be projected with some risk factor, said system comprising:

means for issuing into a floating rate zero coupon note purchase insurance account a periodically renewable term life insurance policy to insure the availability of financial means to purchase a floating rate zero coupon note having a scheduled maturity date to fund the purchase of a particular service or commodity, each said prospective purchaser holding at least one policy in said floating rate zero coupon note purchase insurance account;

account list means for storing an account list of current information for each floating rate zero coupon note purchase insurance amount into which said issuing means has issued a policy:

means for entering insurance purchase, periodic premium and death benefit payment request data and customer inquiries;

means responsive to said entering means and operating on said account list means for processing periodically said insurance purchase, periodic premium payment, and death benefit payment request data to update said account list;

means responsive to a death benefit payment request through said entering means for calculating the amount of the death benefit payable upon the death of the insured to at least one designated beneficiary account;

means responsive to said issuing means for establishing the schedule of periodic premiums to be charged for said insurance based on a projected death benefit payment and type of life insurance policy selected, wherein the projected death benefit payment under said life insurance policy is determined on the basis of maturity of the floating rate zero coupon note, cost of the service or commodity at time of purchase, the floating rate zero coupon note issuer's risk premium, and the floating rate zero coupon note issuer's target profit margin;

asset position list means for storing an asset position of current information concerning a portfolio of investments purchased with insurance policy premiums and interim investment cash flows;

portfolio management means for selecting a portfolio of securities and updating said asset position list periodically, based on an amount of cash that is available for investment, current composition of the asset portfolio, projected cash need for the following period, projected aggregate floating rate zero coupon note purchase insurance liability schedule, and predefined portfolio selection criteria, in order to generate a stream of cash flows from the asset portfolio that will be sufficient to cover in full in a timely manner the cost of meeting death benefit payment obligations;

means for recording the selected security purchase and sale transaction data to update the asset position list;

management reporting means responsive to said issuing means, said account list means, said entering means, said processing means, said portfolio management means and said recording means for periodically generating a report including a summary of insurance purchases, periodic premium payments, and death benefit payment transactions, asset and liability position, and investment performance;

investor billing and reporting means means for sending policy holders periodic premium notices and status reports of their accounts; and

transaction and inquiry reporting means responsive to said entering means, said account list means, said schedule establishing means and said investor billing and reporting means for confirming individual transactions and responding to inquiries from customers.

30. The data processing system of claim 29, wherein:

said schedule of periodic premiums is further based on sex of the insured, age of the insured, and risk profile of the insured; and

said projected death benefit payment is further based on current and forecasted future rate of escalation in the cost of the service or commodity, current and forecasted general inflation rates, and projected yields available on investment instruments.

31. The data processing system of claim 29, wherein:

said schedule includes a premium payment grace period; said system further comprising:

means for drawing automatic premium loans to make a premium payment at the end of the premium payment grace period.

32. The data processing system of claim 31, wherein said automatic premium loan drawing means comprises:

means for determining when the end of the premium payment grace period under any particular policy has occurred;

means for determining whether underlying beneficiary floating rate zero coupon note accounts contain sufficient accrued interest to pay the remaining balance of the premium due in full or to make a partial premium payment;

means responsive to said grace period end determining means and said accrued interest sufficiency determining means for calculating the fractional period over which the policy can be extended by utilizing the available accrued interest to pay all or a portion of the periodic premium; and

means responsive to said fractional period calculating means for determining aggregate daily automatic premium loans.

33. The data processing system of claim 29, wherein said death benefit calculating means comprises:

means for compiling a list of all the floating rate zero coupon note purchase insurance policies in an account on which a death benefit payment request has been made;

means responsive to said compiling means for determining which type of life insurance policy each policy in said account is;

meats for determining whether the death of each insured has been verified;

means responsive to said policy type determining means and said death verification determining means for determining the amount of death benefit payable under each policy for which the death of each insurent has been verified; and

means responsive to said compiling means and said amount determining means for determining aggregate death benefit payable under all such policies in a particular account.

34. The data processing system of claim 29, wherein said periodic premium schedule establishing means comprises:

means for determining a future value rate based on information concerning at least the projected rate of change of the cost of the service or commodity;

means for determining a present value discount rate by ting an insurer's risk premium rate and a target profit margin from investment yield obtainable upon investment of funds received from the sale of said floating rate zero coupon note purchase insurance policies and reinvestment of any interim cash flows;

means responsive to said determined future value rate and said determined present value discount rate for calculating a projected death benefit payment by compounding the current cost of the service or commodity over the life of the floating rate zero coupon note to be purchased with the death benefit payment at said future value escalation rate and discounting at said present value discount rate; and

means responsive to said projected death benefit for determining a periodic premium on any particular floating rate zero coupon note purchase insurance policy based on the projected death benefit payment and the type of life insurance policy.

35. The data processing system of claim 34, wherein said periodic premium determining means further bases said periodic premium on the sex of each insured, the age of each insured, and the risk profile of each insured.

36. The data processing system of claim 29, wherein said portfolio management and updating means comprises:

means for determining a schedule of projected insurance liabilities based on an aggregate insurance schedule and actuarial data regarding likelihood of death occurring prior to the expiration of the paid-up term of each life insurance policy in said schedule;

means responsive to said asset position list means for . the amount of funds available for investment based on the amount of cash on hand and the current market value of the asset portfolio;

means responsive to said liability schedule determining means for calculating a composite cost of the insurance liabilities; said

means responsive to the schedule of projected insurance liabilities, amount of funds available for investment, schedule of yields currently available for investment, and the current composition of the asset portfolio for selecting securities to be purchased or sold, for calculating a yield on the asset portfolio and for evaluating the effect of the selected purchases or sales on the portfolio in order to reject any selection that would result in a yield on the portfolio that is less than the composite cost of the insurance liabilities and in order to reject also any selection that would result in a projected income stream for which the projected cash availability for any period is less than the projected death benefit payment liability for said period.

37. The data processing system of claim 29, wherein said investor billing and reporting means comprises:

means responsive to said account list means for determining when a policy holder should be sent a periodic premium notice;

means responsive to said account list means and said entering means for adjusting the amount of coverage a floating rate zero coupon note purchase insurance policy provides based on the number of floating rate zero coupon notes of each maturity the policy beneficiary would ultimately like to own and the respective numbers of floating rate zero coupon notes owned by at least one of the beneficiary and another holding on the beneficiary's behalf;

means responsive to said schedule establishing means and said premium notice sending determination means for determining a premium due on each policy on which a premium notice is to be sent; and

means responsive to said due premium determining means for determining an aggregate premium balance owed by each account holder who is to be sent a premium notice.

38. A data processing method for administering an insurance program to insure, upon the death of a prospective purchaser of a floating rate zero coupon note, the availability of financial means for purchasing the floating rate zero coupon note, said note being issued by an issuer and designed to fully fund a future liability whose projected due date and whose present cost are known but whose future cost is unknown but can be projected with some risk factor, said method comprising the steps of:

issuing into a floating rate zero coupon note purchase insurance account a periodically renewable term life insurance policy to insure the availability of financial means to purchase a floating rate zero coupon note having a scheduled maturity date to fund the purchase of a particular service or commodity, each said prospective purchaser holding at least one policy in said floating rate zero coupon note purchase insurance account;

maintaining an account list of current information for each floating rate zero coupon note purchase insurance account into which a policy has been issued;

entering insurance purchase, periodic premium payment, and death benefit payment request data and customer inquiries into a data processing system;

responsive to said data entry and operating on said account list, processing periodically said insurance purchase, periodic premium payment, and death benefit payment request data to update said account list;

responsive to an entered death benefit payment request the amount of the death benefit payable upon the death of the insured to at least one designated beneficiary account;

establishing responsive to said issuing step the schedule of periodic premiums to be charged for said insurance based on a projected death benefit payment and type of life insurance policy selected, wherein the projected death benefit payment under said life insurance policy is determined on the basis of maturity of the floating rate zero coupon note, cost of the service or commodity at the time of purchase, the floating rate zero coupon note issuer's risk premium, and the floating rate zero coupon note issuer's target profit margin;

maintaining an asset position list of current information concerning a portfolio of investments purchased with insurance policy premiums and interim investment cash flows;

selecting a portfolio of securities and updating said asset position list periodically, based on an amount of cash that is available for investment, current composition of the asset portfolio, projected cash need for the following period, projected aggregate floating rate zero coupon note purchase insurance liability schedule, and predefined portfolio selection criteria, thereby generating a stream of cash flows from the asset portfolio that will be sufficient to cover in full in a timely manner the cost of meeting the death benefit payment obligations;

recording the selected security purchase and sale scan data to update the asset position list;

responsive to said issuing step, said account list step, said entering step, said processing step, said selecting and updating step, and said recording step, periodically generating a report including a summary of insurance purchase, periodic premium payment, and death benefit payment transactions, asset and liability position, and investment performance;

responsive to said schedule establishing step and said account list maintaining step, sending policy holders periodic premium notices and status reports of their accounts; and

responsive to said entering step, said account list maintaining step, said schedule establishing step and said sending step, confirming individual transactions and responding to inquiries from customers.

39. The data processing method of claim 38 wherein:

said schedule of periodic premiums is further based on sex of the insured, age of the insured, and risk profile of the insured; and

said projected death benefit payment is further base on current and forecasted future rate of escalation in the cost of the service or commodity, current and forecasted general inflation rates, and projected yields available on investment instruments.

40. The data processing method of claim 38, wherein:

said schedule includes a premium payment trace period; said method further comprising the step of:

drawing automatic premium loans to make a premium pa the end of the premium payment grace period.

41. The data processing method of claim 40, wherein said automatic premium loan drawing step comprises:

determining when the end of the premium payment grace period under any particular policy has occurred;

determining whether underlying beneficiary floating rate zero coupon note accounts contain sufficient accrued interest to pay the remaining balance of the premium due in full or to make a partial premium payment;

responsive to said grace period end determining step and said accrued interest sufficiency determining step, calculating the fractional period over which the policy can be extended by utilizing the available accrued interest to pay all or a portion of the periodic premium; and

responsive to said frictional period calculating step, determining aggregate daily automatic premium loans.

42. The data processing method of claim 38, wherein said death benefit calculating step comprises:

compiling a list of all floating rate zero coupon note purchase insurance policies in an account on which a death benefit payment request has been made;

responsive to said compiling step, determining which type of life insurance policy each policy in said account is;

determining whether the death of each insured has been verified;

responsive to said policy type determining step and said death verification determining step, determining the amount of death benefit payable under each policy for which the death of each insured has been verified; and

responsive to said compiling step ant said amount determining step, determining an aggregate death benefit payable under all such policies in a particular account.

43. The data processing method of claim 38, wherein said periodic premium schedule establishing step comprises:

determining a future value escalation rate based on information concerning at least the projected rate of change of the cost of the service or commodity;

determining a present value discount rate by subtracting an insurer's risk premium rate and a target profit margin from investment yield obtainable upon investment of funds received from sale of said floating rate zero coupon note purchase insurance policies and reinvestment of any interim cash flows;

responsive to said determined future value escalation rate and said determined present value discount rate, calculating a projected death benefit payment by compounding the current cost of the service or commodity over the life of the floating rate zero coupon note to be purchased with the death benefit payment at said future value escalation rate and discounting at said present value discount rate; and

responsive to said projected death benefit, determining a periodic premium on any particular floating rate zero coupon note purchase insurance policy based on the projected death benefit payment and the type of life insurance policy.

44. The data processing method of claim 43 wherein said periodic premium is further based on the sex of each insured, the age of each insured, and the risk profile of each insured.

45. The data processing method of claim 38, wherein said portfolio selecting and updating step comprises:

determining a schedule of projected insurance liabilities based on an aggregate insurance schedule and actuarial data regarding likelihood of death occurring prior to the expiration of the paid-up term of each life insurance policy in said schedule;

responsive to said asset position list maintaining means, determining the amount of funds available for investment based on the amount of cash on hand and the current market value of the asset portfolio;

responsive to said determined liability schedule, a composite cost of the insurance liabilities; and

responsive to the schedule of projected insurance liabilities, amount of funds available for investment, schedule of yields currently available for investment, and the current composition of the asset portfolio, selecting securities to be purchased or sold, calculating a yield on the asset portfolio, and evaluating the effect of the selected purchases or sales on the portfolio, rejecting any selection that would result in a yield on the portfolio that is less than the composite cost of the insurance liabilities and rejecting also any selection that would result in a projected income stream for which the projected cash availability for any period is less than the projected death benefit payment liability for said period.

46. The data processing method of claim 38, wherein said policy holder periodic premium notice and report sending step comprises:

responsive to said maintained account list determining when a policy holder should be sent a periodic premium notice;

responsive to said account list maintaining step and said entering step, adjusting the amount of coverage a floating rate zero coupon note purchase insurance policy provides based on the number of floating rate zero coupon notes of each maturity the policy beneficiary would ultimately like to own and the respective numbers of floating rate zero coupon notes owned by at least one of the beneficiary and another holding on the beneficiary's behalf;

responsive to said established schedule and said premium notice sending determination, determining a premium due on each policy on which a premium notice is to be sent; and

responsive to said due premium determination, determining an aggregate premium balance owed by each account holder who is to be sent a premium notice.

47. A data processing system for administering an insurance program to insure, upon the death of a prospective purchaser of a floating rate zero coupon note, the availability of financial means for purchasing the floating rate zero coupon note, said note being issued by an issuer and designed to fully fund a future liability whose projected due date and whose present cost are known but whose future cost is unknown but can be projected with some risk factor, said system comprising:

means for issuing into a floating rate zero coupon note purchase insurance account a periodically renewable term life insurance policy to insure the availability of financial means to purchase a floating rate zero coupon note having a scheduled maturity date to fund the purchase of a particular service or commodity, each said prospective purchaser holding at least one policy in said floating rate zero coupon note purchase insurance account;

account list means for storing an account list of information for each floating rate zero coupon note purchase insurance account into which said issuing means has issued a policy;

means for entering insurance purchase, periodic premium payment, and death benefit payment request data and customer inquiries;

means responsive to said entering means and operating on said account list means for processing periodically said insurance purchase, periodic premium payment, and death benefit payment request data to update said account

means responsive to a death benefit payment request entered through said entering means for calculating the amount of the death benefit payable upon the death of the insured to at least one designated beneficiary account;

means responsive to said issuing means for establishing the schedule of periodic premiums to be charged for said insurance based on a projected death benefit payment and type of life insurance policy selected, wherein the projected death benefit payment under said life insurance policy is determined on the basis of maturity of the floating rate zero coupon note, cost of the service or commodity at time of purchase, the floating rate zero coupon note issuer's risk premium, and the floating rate zero coupon note issuer's target margin;

management reporting means responsive to said issuing means, said account list means, said entering means and said processing means for periodically generating a report including a summary of insurance purchases, periodic premium payments and death benefit payment transactions;

investor billing and reporting means responsive to schedule establishing means and said account list means for sending policy holders periodic premium notices and status reports of their accounts; and

transaction and inquiry reporting means responsive said entering means, said account list means, said schedule establishing means and said investor billing and reporting means for confirming individual transactions and responding to inquiries from customers.

48. The data processing system of claim 47, wherein:

said schedule of periodic premiums is further based on sex of the insured, age of the insured, and risk profile of the insured; and

said projected death benefit payment is further based on current and forecasted future ate of escalation in the cost of the service or commodity, current and forecasted general inflation rates, and projected yields available on investment instruments.

49. The data processing system of claim 47, wherein:

said schedule includes a premium payment grace period; said system further comprising:

means for drawing automatic premium loans to make a pr payment at the end of the premium payment grace period.

50. The data processing system of claim 49, wherein said automatic premium loan drawing means comprises:

means for determining when the end of the premium payment grace period under any particular policy has occurred;

means for determining whether underlying beneficiary floating rate zero coupon note accounts contain sufficient accrued interest to pay the remaining balance of the premium due in full or to make a partial premium payment;

means responsive to said grace period end determining means and said accrued interest sufficiency determining means for calculating the fractional period over which the policy can be extended by utilizing the available accrued interest to pay all or a portion of the periodic premium; and

means responsive to said fractional period calculating means for determining aggregate daily automatic premium loans.

51. The data processing system of claim 47 further comprising:

asset position list means for storing an asset position list of current information concerning a portfolio of investments purchased with insurance policy premiums and interim investment cash flows;

portfolio management means for selecting a portfolio of securities and updating said asset position list periodically, based on an amount of cash that is available for investment, current composition of the asset portfolio, projected cash need for the following period, projected aggregate floating rate zero coupon note purchase insurance liability schedule, and predefined portfolio election criteria, in order to generate a stream of cash flows from the asset portfolio that will be sufficient to cover in full in a timely manner the cost of meeting death benefit payment obligations; and

means for recording the selected security purchase and sale transaction data to update the asset position list.

52. The data processing system of claim 51, wherein said portfolio management and updating means comprises:

means for determining a schedule of projected insurance liabilities based on an aggregate insurance schedule and actuarial data regarding likelihood of death occurring prior to the expiration of the paid-up term of each life insurance policy in said schedule;

means responsive to said asset position list means for determining the amount of funds available for investment based on the amount of cash on hand and the current market value of the asset portfolio;

means responsive to said liability schedule determining means for calculating a composite cost of the insurance liabilities; and

means responsive to the schedule of projected insurance liabilities, amount of funds available for investment, schedule of yields currently available for investment, and the current composition of the asset portfolio for selecting securities to be purchased or sold, for calculating a yield on the asset portfolio and for evaluating the effect of the selected purchases or sales on the portfolio in order to reject any selection that would result in a yield on the portfolio that is less than the composite cost of the insurance liabilities and in order to reject also any selection that would result in a projected income stream for which the projected cash availability for any period is less than the projected death benefit liability for said period.

53. The data processing system of claim 47, wherein said death benefit calculating means comprises:

means for compiling a list of all the floating rate zero coupon note purchase insurance policies in an account on which a death benefit payment request has been made;

means responsive to said compiling means for determining which type of life insurance policy each policy in said account is;

means for determining whether the death of each insured has been verified;

means responsive to said policy type determining means and said death verification determining means for determining the amount of death benefit payable under each policy for which the death of each insured has been verified; and

means responsive to said compiling means and said amount determining means for determining aggregate death benefit payable under all such policies in a particular account.

54. The data processing system of claim 47, wherein said periodic premium schedule establishing means comprises:

means for determining a future value escalation rate based on information concerning at least the projected rate of change of the cost of the service of commodity;

means for determining a present value discount rate by subtracting an insurer's risk premium rate and a target profit margin from investment yield obtainable upon investment of funds received from the scale of said floating rate zero coupon note purchase insurance policies and reinvestment of any interim cash flows;

means responsive to said terminated future value escalation rate and said determined present value discount rate for calculating a projected death benefit payment by compounding the current cost of the service or commodity over the life of the floating rate zero coupon note to be purchased with the death benefit payment at said future value escalation rate and discounting at said present value discount rate; and

means responsive to said projected death benefit for determining a periodic premium on any particular floating rate zero coupon note purchase insurance policy based on the projected death benefit payment and the type of life insurance policy.

55. The data processing system of claim 54, wherein said periodic premium determining means further bases said periodic premium on the sex of each insured, the age of each insured, and the risk profile of each insured.

56. The data processing system of claim 47, wherein said investor billing and reporting means comprises:

means responsive to said account list means for when a policy holder should be sent a periodic premium notice;

means responsive to said account list means and said entering means for adjusting the amount of coverage a floating rate zero coupon note purchase insurance policy provides based on the number of floating rate zero coupon notes of each maturity the policy beneficiary would ultimately like to own and the respective numbers of floating rate zero coupon notes owned by at least one of the beneficiary and another holding on the beneficiary's behalf;

means responsive to said schedule establishing means and said premium notice sending determination means for determining a premium due on each policy on which a premium notice is to be sent; and

means responsive to said due premium determining means for determining an aggregate premium balance owed by each account holder who is to be sent a premium notice.

57. A data processing method for administering an insurance program to insure, upon the death of a prospective purchaser of a floating rate zero coupon note, the availability of financial means for purchasing the floating rate zero coupon note, said note being issued by an issuer and designed to fully fund a future liability whose projected due date and whose present cost are known but whose future cost is unknown but can be projected with some risk factor, said method comprising the step of:

issuing into a floating rate zero coupon note purchase insurance account a periodically renewable term life insurance policy to insure the availability of financial means to purchase a floating rate zero coupon note having a scheduled maturity date to fund the purchase of a particular service or commodity, each said prospective purchaser holding at least one policy in said floating rate zero coupon note purchase insurance account;

maintaining an account list of current information for each floating rate zero coupon note purchase insurance account into which a policy has been issued;

entering insurance purchase, periodic premium payment, an death benefit payment request data and customer inquiries into a data processing system;

responsive to said data entry and operating on said account list, processing periodically said insurance purchase, periodic premium payment, and death benefit payment request data to update said account list;

responsive to an entered death benefit payment request, calculating the amount of the death benefit payable upon the death of the insured to at least one designated beneficiary account;

establishing responsive to said issuing step the schedule of periodic premiums to be charged for said insurance based on a projected death benefit payment and type of life insurance policy selected, wherein the projected death benefit payment under said life insurance policy is determined on the basis of maturity of the floating rate zero coupon note, cost of the service or commodity at the time of purchase, the floating rate zero coupon note issuer's risk premium, and the floating rate zero coupon note issuer's target profit margin;

responsive to said issuing step, said account list maintaining step, said entering step and said processing step, periodically generating a report including a summary of insurance purchase, periodic premium payment, and death benefit payment transactions;

responsive to said schedule establishing step and said account list maintaining step, sending policy holders periodic premium notices and status reports of their accounts; and

responsive to said entering step, said account list main - step, said schedule establishing step and said sending step, confirming individual transactions and responding- to inquiries from customers.

58. The data processing method of claim 57 wherein:

said schedule of periodic premiums is further based on sex of the insured, ate of the insured, and risk profile of the insured; and

said projected death benefit payment is further based on current and forecasted future rate of escalation in the cost of the service or commodity, current and forecasted general inflation rates, and projected yields available on investment instruments.

59. The data processing method of claim 57 wherein:

said schedule includes a premium payment grace period said method further comprising the step of:

at the end of the premium payment grace period.

60. The data processing method of claim 59, wherein said automatic premium loan drawing step comprises:

determining when the end of the premium payment grace period under any particular policy has occurred;

determining whether underlying beneficiary floating rate zero coupon note accounts contains sufficient accrued interest to pay the remaining balance of the premium due in full or to make a partial premium payment;

responsive to said grace period end determining step and said accrued interest sufficiency determining step, calculating the fractional period over which the policy can be extended by utilizing the available accrued interest to pay all or a portion of the periodic premium; and

responsive to said fractional period calculating step, determining aggregate daily automatic premium loans.

61. The data processing method of claim 57 further comprising the steps of:

maintaining an asset position list of current information concerning a portfolio of investments purchased with insurance policy premiums and interim investment cash flows;

selecting a portfolio of securities and updating said asset position list periodically, based on an amount of cash that is available for investment, current composition of the asset portfolio, projected cash need for the following period, projected aggregate floating rate zero coupon note purchase insurance liability schedule, and predefined portfolio selection criteria, thereby generating a stream of cash flows from the asset portfolio that will be sufficient to cover in full in a timely manner the cost of meeting the death benefit payment obligations; and

recording the selected security purchase and sale transaction data to update the asset position list.

62. The data processing method of claim 61, wherein said portfolio selecting and updating step comprises:

determining a schedule of projected insurance liabilities based on an aggregate insurance schedule and actuarial data regarding likelihood of death occurring prior to the expiration of the paid-up term of each life insurance policy in said schedule;

responsive to said asset position list maintaining means, determining the amount of funds available for investment based on the amount of cash on hand and the current market value of the asset portfolio;

responsive to said terminated liability schedule, calculating a composite cost of the insurance liabilities; and

responsive to the schedule of projected insurance liabilities, amount of funds available for investment, schedule of yields currently available for investment, and the current composition of the asset portfolio, selecting securities to be purchased or sold, calculating a yield on the asset portfolio and evaluating the effect of the selected purchases or sales on the portfolio, rejecting any selection that would result in a yield on the portfolio that is less than the composite cost of the insurance liabilities and reflecting also any selection that would result in a projected income stream for which the projected cash availability for any period is less than the projected death benefit payment liability for said period.

63. The data processing method of claim 57, wherein said death benefit calculating step comprises:

compiling a list of all floating rate zero coupon note purchase insurance policies in an account on which a death benefit payment request has been made;

responsive to said compiling step, determining which type of life insurance policy each policy in said account is;

determining whether the death of each insured has been verified;

responsive to said policy type determining step and said death verification determining step, determining the amount of death benefit payable under each policy for which the death of each insured has been verified; and

responsive to said compiling step and said amount determining step, determining an aggregate death benefit payable under all such policies in a particular account.

64. The data processing method of claim 57, wherein

schedule establishing step comprises:

determining a future value escalation rate based on information concerning at least the projected rate of change of the cost of the service or commodity;

determining a present value discount rate by subtracting an insurer's risk premium rate and a target profit margin from investment yield obtainable upon investment of funds received from sale of said floating rate zero coupon note purchase insurance policies and reinvestment of any interim cash flows;

responsive to said determined future value escalation rate and said determined present value discount rate, calculating a projected death benefit payment by compounding the current cost of the service or commodity over the life of the floating rate zero coupon note to be purchased with the death benefit payment at said future value escalation rate and discounting at said present value discount rate; and

responsive to said projected death benefit, determining a periodic premium on any particular floating rate zero coupon note purchase insurance policy based on the projected death benefit payment and the type of life insurance polity.

65. The data processing system of claim 64 wherein said periodic premium is further based on the sex of each insured, the age of each insured, and the risk profile of each insured.

66. The data processing method of claim 57, wherein said policy holder periodic premium notice and report sending step comprises:

responsive to said maintained determining when a policy holder should be sent a periodic premium notice;

responsive to said account list maintaining step and entering step, adjusting the amount of coverage a floating rate zero coupon note purchase insurance policy provides based on the number of floating rate zero coupon notes of each maturity the policy beneficiary would ultimately like to own and the respective numbers of floating rate zero coupon notes owned by at least one of the beneficiary and another holding on the beneficiary's behalf;

responsive to said established schedule and said premium notice sending determination, determining a premium due on each policy on which a premium notice is to be sent; and

responsive to said due premium determination, determining an aggregate premium balance owed by each account holder who is to be sent a premium notice.

Description

BACKGROUND OF THE INVENTION

This invention relates to data processing methods and apparatus for implementing and administering a program for insuring the funding of a future liability of uncertain future cost when that liability can be funded fully prior to the projected date of the liability at a cost that is known and fixed at the date of funding. In particular, this invention relates to a data processing method and apparatus for issuing floating rate zero coupon note purchase insurance to insure the availability of financial means for purchasing a floating rate zero coupon note or other similar financial contract or obligation, which is designed to fund fully a future liability whose projected due date and whose present cost are known but whose future cost is unknown, upon the death of the prospective purchaser of the floating rate zero coupon note. More generally, this invention relates to a data processing method and apparatus for issuing such insurance in the form of one-year renewable-term life insurance and for funding this insurance program such that the funds available through the investment of the proceeds from the sale of the insurance and the reinvestment of interim cash flow will be sufficient to cover in full or in predetermined part in a timely manner the cost of purchasing the floating rate zero coupon note whose purchase is insured in the event the person on whom the insurance policy was written should die during the term of the policy.

The floating rate zero coupon note whose purchase is being insured carries an interest rate which varies automatically with the rate of inflation of the cost of some specified service or commodity and its interest payments are automatically reinvested, so as to fund fully the currently uncertain cost of the service or commodity at a future date. When all the interest payments are reinvested, the value of the floating rate zero coupon note (initial principal plus accrued and reinvested interest) increases over time in a manner that assures that the value of the floating rate zero coupon note as of its maturity date equals as of that date the cost of the service or commodity that was to be defeased.

The price charged for a floating rate zero coupon note, which together with the number or fraction of floating rate zero coupon notes whose purchase is insured determines the amount of the death benefit payable under the floating rate zero coupon note purchase insurance policy, depends on the current most of the service or commodity, the projected rate of escalation in the cost of this service or commodity over the life of the floating rate zero coupon note, current interest rates, projected future interest rates, the risk premium that compensates the floating rate zero coupon note issuer for assuming the cost escalation risk and the floating rate zero coupon note issuer's target profit margin. Specifically, the price of a floating rate zero coupon note is obtained by first escalating the current cost of the service or commodity at the projected rate of escalation in the cost of this service or commodity, and then discounting this escalated value at a rate that equals (1) the projected yield to be realized on the investment of the proceeds to be received from the sale of the floating rate zero coupon note and on the reinvestment of interim cash flows minus (2) the risk premium and minus also (3) the target profit margin. Although not essential to the operation or understanding of this invention, further details of the floating rate zero coupon note are provided in copending, commonly-assigned U.S. patent application Ser. No. 849,779, filed Apr. 9, 1986, entitled "Method and Apparatus for Funding a Future Liability of Uncertain Cost."

The floating rate zero coupon note is designed to fund a future liability whose projected due date and whose present cost are known and whose future cost is unknown but can be projected with some risk factor. The floating rate zero coupon note is different from traditional insurance programs, mutual funds and other investment programs, which only hedge a future liability, because it defeases the future liability. It will cover fully the cost of the service or commodity on the projected due date, eliminating to the purchaser of the note the risk of underfunding.

However, the risk of underfunding is fully eliminated only if the purchaser pays in full the purchase price of one full unit of the floating rate zero coupon note. Personal budget constraints might preclude a one-time purchase of a full unit, requiring multiple purchases of fractional units over time in order to accumulate one full unit, or the purchase of a full unit on an installment basis. If the person is purchasing the floating rate zero coupon note on behalf of someone else, multiple purchases of fractional units or installment purchases expose the beneficiary to the risk that the purchaser's death could occur before the purchase of a full unit is fully funded. For example, if the floating rate zero coupon note is intended to fund the uncertain future cost of one year of college education and a parent who is purchasing fractional floating rate zero coupon notes on behalf of a child dies before a full unit has been purchased, the surviving parent or others will have to raise the cash from other sources to pay for the balance of the floating rate zero coupon note. However, the day-to-day purchase price of the floating rate zero coupon note may increase as a function of increases in the rate of inflation of the future cost of college. Insurance proceeds from a conventional life insurance policy on the deceased might be able to cover this uncertain purchase price, if there is adequate insurance and if the insurance proceeds are not needed for other purposes. But traditional life insurance programs are not designed to fund fully a potential future liability of uncertain cost, such as the purchase price of a floating rate zero coupon note which may escalate over time with the rate of inflation of the future cost of college or some other specified service or commodity.

Accordingly, there is a need for an insurance method which will fully fund a potential future liability of uncertain cost, such as the purchase price of a floating rate zero coupon note or other similar financial contract or obligation, which ties the insurance benefit directly to the price of the underlying uncertain cost, so that the future liability will be fully funded in the event of the premature death of the person funding the liability.

SUMMARY OF THE INVENTION

In view of the foregoing, it is an object of this invention to provide a data processing method and apparatus for implementing a life insurance program which provides the beneficiary a benefit sufficient to cover fully the uncertain future cost of a floating rate zero coupon note, which is designed to fund an uncertain future liability whose cost can be projected on the basis of current cost data and assumptions regarding the rate of change of that data, and which automatically determines the insurance premiums that must be charged in order properly to fund the insurance program.

It is a more particular object of this invention to provide data processing methods and apparatus for implementing a life insurance program which provides a parent or relative who wishes to purchase floating rate zero coupon notes designed to defease the uncertain future cost of a college education for a child with assurance that the child's education will be fully funded in the event the parent or relative should die before he or she can fully purchase the full complement of floating rate zero coupon notes needed to defease the cost of the child's college education.

It is a further object of this invention to provide a data processing method and apparatus for issuing one-year renewable term life insurance that will provide the purchaser assurance that the beneficiary will be able to purchase a floating rate zero coupon note that will defease the future cost of some specified liability in full. A data processing method and apparatus are also provided for funding the obligations that arise out of the sale of floating rate zero coupon note purchase insurance when the cost of the uncertain future liability can be somewhat reasonably projected on the basis of the current cost of covering the liability if the liability were payable currently, and on assumptions regarding the expected rate of escalation in the cost of funding the liability in the future. As such, the floating rate zero coupon note purchase insurance imposes on the seller of such insurance the risk of death of the insured.

It is a still more particular object of this invention to provide a data processing method and apparatus for issuing one-year renewable term life insurance which provides a parent or relative who wishes to purchase floating rate zero coupon notes designed to fund the uncertain future cost of a college education for a child with the assurance that the child's education will be fully funded in the event the parent or relative should die before he or she can purchase the full complement of floating rate zero coupon notes needed to defease the cost of the child's college education. A data processing method and apparatus are also provided for funding the obligations that arise out of the sale of the one-year renewable term life insurance wherein the purchaser's initial premium followed by a periodic sequence of premiums on specified dates are invested and interim cash flows are reinvested so as to achieve an overall rate of return that will be sufficient to cover in full in a timely manner the cost of purchasing floating rate zero coupon notes upon the death of the insured sufficient to defease the cost of a college education for the beneficiary of the insured.

These and other objects of the invention are accomplished by providing a data processing system which implements an insurance program that protects an individual against the risk that the person who intended to purchase floating rate zero coupon notes on behalf of the individual dies before funding the purchase fully, for example, the risk that a parent dies before funding fully the purchase of floating rate zero coupon notes designed to defease the cost of a child's future college education.

The data processing system provides a method and apparatus for calculating automatically the amount of the death benefit payment to be made to certain designated beneficiary accounts upon the death of the insured; a method and apparatus for drawing automatic premium loans to make a premium payment at the end of the premium payment grace period; and a method and apparatus for establishing the schedule of annual premiums to be charged for the floating rate zero coupon note insurance based on the maturity of the floating rate zero coupon note, type of life insurance policy selected, sex and risk profile of the insured, and the current and forecasted future rate of college cost escalation, current and forecasted general inflation rates, the projected yields available on investment instruments, the floating rate zero coupon note insurer's risk premium, and the floating rate zero coupon note issuer's target profit margin.

The system also provides guidance in the management of the insurer's funds, which consist of insurance premiums and interim cash flow realized upon the investment of insurance premiums, so that the average yield on the investment portfolio at least matches the projected cost of the life insurance liabilities and so that the projected insurance liability stream is covered period by period. The system automatically handles the periodic processing of customer orders and periodic billing for and receipt of insurance premiums; updates the net asset position of the insurance fund; monitors investment performance; furnishes information on a regular basis to the insurance manager to permit the manager to establish investment objectives and make investment decisions consistent with regulatory constraints and, in any case, with properly funding the insurance liabilities; provides information to the insurance manager regarding the composition of the asset portfolio and the composition of the forecasted insurance liability stream; sends premium notices and reports to insurance account holders; and prepares end-of-period financial statements.

BRIEF DESCRIPTION OF THE DRAWINGS

The above and other objects and advantages of the invention will be apparent upon consideration of the following detailed description, taken in conjunction with the accompanying drawings, in which like reference characters refer to like parts throughout, and in which:

FIGS. 1A-1C are a flow chart depicting the data processing methodology and structure in accordance with the principles of the invention;

FIG. 2 is a flow chart depicting in more detail the point-of-sale station to central computer interface represented by block 105 in FIG. 1A;

FIG. 3 is a flow chart depicting in more detail the method and apparatus for calculating the amount of the death benefit payments to be made to the designated beneficiary accounts upon the death of the insured represented by block 115 in FIG. 1A;

FIGS. 4A-4B are a flow chart depicting in more detail the method and apparatus for drawing automatic premium loans to make a premium payment at the end of the premium payment grace period represented by block 134 in FIG. 1B;

FIGS. 5A-5C are a flow chart depicting in more detail the method and apparatus for establishing the schedule of premiums to be charged for the insurance represented be block 135 in FIG. 1B;

FIGS. 6A-6B are a flow chart depicting in more detail the asset portfolio update operation represented by block 136 in FIG. 1B;

FIGS. 7A-7B are a flow chart depicting in more detail the method and apparatus for billing customers for payment of premiums and for reporting to policy holders represented by block 139 in FIG. 1C;

FIG. 8 is a block diagram of a computer system suitable for implementing the invention; and

FIG. 9 is a block diagram showing a portion of the computer system of FIG. 8 in more detail.

DETAILED DESCRIPTION OF THE INVENTION

The data processing system for administering the floating rate zero coupon note purchase insurance program comprises a central computer connected to a network of remote point-of-sale stations. In overview, the system operates as follows. The point-of-sale stations serve as the data entry points for insurance unit purchases and payment of periodic (e.g., annual, or any other period may be used) insurance premiums. They also serve as the data entry points for the purpose of notifying the insurer that a death benefit payment is due and providing the insurer the necessary information for verification purposes. The point-of-sale stations also serve as access points through which salespeople can transmit customer inquiries concerning the floating rate zero coupon note purchase insurance program and receive data to respond to those inquiries, determine the annual premium on any floating rate zero coupon note purchase insurance policy the insurer is offering and determine the appropriate charge to the customer for insurance purchases, and determine the amount of any death benefit that becomes payable. In addition, each point-of-sale station stores a record of each customer transaction it handles, and periodically these are transmitted to the central computer for processing.

The central computer receives and processes customer transaction data from the point-of-sale stations, responds to customer inquiries, and initiates annual premium notices and automatic premium loans. The data processing system, which operates on the central computer, updates the list of policy holder accounts, including opening new accounts and closing accounts whose policies all either expire or are paid off on due to the death of the insured. This system also provides confirmations of account status to the relevant point-of-sale station when the insurer is notified that a death benefit payment is due. The central system also furnishes information to the insurance manager concerning new purchases, annual premium payments, and the payment of death benefits. The system also provides the insurance manager with information (1) regarding the performance of the asset portfolio, the projected yield on the asset portfolio, and the projected cost of the insurance liability pool, and (2) comparing the projected cash flow stream from the asset portfolio to the projected insurance liability stream. The data processing system creates a periodic (e.g., daily) report to the insurance manager summarizing customer transactions, investment transactions, asset and liability position, and yield and cost data. It also prepares a regular end-of-period report that summarizes the investment performance of the fund during the period.

With the foregoing overview in mind, the detailed operation of the system can best be understood by referring to FIGS. 1A-7B, which are flow charts of the operation of the system in the context of an insurance program for insuring the purchase of floating rate zero coupon notes for funding in full, i.e., defeasing, the uncertain cost of a future college education. Although the invention is shown and described herein in the context of insuring the funding of future college education costs, it will be apparent to one skilled in the art that the invention could readily be adapted to insuring defeasance programs for funding other future liabilities of uncertain cost, such as the future uncertain cost of purchasing a home, of a stream of future pension benefits, of purchasing one or more pieces of equipment, of purchasing a unit of gold or some other commodity or some service, etc.

As shown in FIGS. 1A-1C, customers interact with the system at point-of-sale stations. These can be located at remote points limited only by the ability of the point-of-sale stations to communicate electronically with the central computer. Orders and customer inquiries are collected at the point-of-sale stations (block 101). First the customer's (NAME) and account number (NUMBER) are entered. If the customer does not have an account, data are entered indicating that a new account is to be opened. Then an order or inquiry (referred to generically at block 101 as DATA) is entered. A customer may submit a purchase order for an insurance policy, make a regular premium payment (block 102), or inquire as to the status of his or her account (block 103). Someone authorized to act on behalf of the estate of the insured or on behalf of the beneficiary may notify the insurer that a death benefit payment is due (block 104). Transaction requests include the identification of the insurance policy to be purchased or on which an insurance premium or death benefit is to be paid and, in the case of a purchase or premium payment, the amount of the transaction (referred to generically at block 102 as CONTRACT). Inquiries specify the particular information items requested. These orders and inquiries are transmitted to the central computer, and information regarding transactions, insurance premiums, and account status are received back from the central computer and displayed on a CRT terminal (block 105). Alternatively, purchase orders, annual premium payments, and requests for death benefit payments could be stored at block 105 and transmitted periodically (e.g., at the end of each day) to the central computer for processing. FIG. 2 depicts in more detail the point-of-sale station to central computer interface. At the conclusion of each transaction, a customer can request a printed confirmation record of the transaction (block 106).

Each customer request is processed individually in a loop that begins with test 107 and ends at block 130. The incoming request is first subjected to test 107. If the dollar amount of the transaction (AMOUNT) is equal to zero, the request is an inquiry, which is referred to blocks 108-110 for processing. The status of the account is checked at block 108. Information the policy holder requested is retrieved from the master account file at block 109 and the response is transmitted to the policy holder at block 110. The requested information is displayed on the CRT terminal. Table 1 illustrates the type of information a policy holder might request and how that information might be formatted. The response to each inquiry lists the policy holder's name and account number and the number (or numbers) of the policy (or policies) held in the account and then provides the information requested--in this case, the nature and number of floating rate zero coupon notes insured under each policy.

                  TABLE 1
    ______________________________________
    Name:                   John Q. Holder
    Account Number:         001-000000001
    Policy Number:          001-000000001-1
    Floating Rate Zero Coupon Note Maturing:
                            8/15/2001
    Fraction of Note Insured:
                            1.0
    Policy Number:          001-000000001-2
    Floating Rate Zero Coupon Note Maturing:
                            8/15/2002
    Fraction of Note Insured:
                            0.5
    ______________________________________