Insurance companies face stiff competition from each other. They do all they can to enhance their market share and profits. They try to develop new insurance products based on the needs of customers. But often, when the product is found to be a success, competitors try to copy it to the chagrin of the company which created it. Such companies can file for insurance patents and be the sole beneficiary of the new business method for a specified period of time.
Benefits of Insurance Patents
- An insurance company which patents its innovation would be able to solely use it for a specific period of time. As other companies are not allowed to develop a similar product, it would wholly benefit from the hard work put in.
- A company which holds insurance patents can license the same to other insurance companies who want to use the product. This means that other companies get to develop and sell a similar product in exchange for a fee. The amount to be paid is usually 5% of the revenue generated from using the product. The company can thus earn more profit from the innovation.
- The fact that a business method can be patented encourages insurance companies to support innovation and individuals working in these companies are motivated to innovate.
- Also, competing insurance companies, realizing that copycat products are illegal, try to create new products on their own, thus helping the insurance industry as a whole.
- Insurance patents provide a platform to small insurance companies to compete with large ones. They can focus on innovation and earn large fees by licensing their patented products to large companies.
- Product innovators can also turn entrepreneurs. They can start their own business, develop new insurance products, patent them and then license them to insurance companies.
Infringement of Insurance Patents
There may be insurance companies who do not take insurance patents seriously, not realizing the implications of developing a product similar to one which is already patented. When they copy a patented business method, the patent owner can take them to court for patent infringement.
Though insurance patents can be obtained for innovative business methods, a company which files for the patent should ensure that the innovation is not just an abstract idea but a genuine new product which can be used in the insurance business.