Appropriate Structure for Health Insurance Firm Case

Question

Prompt: Client is a health insurance firm that collects a fixed monthly premium per person covered under the plan. In exchange, it pays for all health services that the member requires. In recent years, firm's financial and competitive position has begun to erode, and the CEO has retained you to help them determine what is causing the problem and how to fix it.

Upon asking clarifying questions, it is revealed that firm is a mutual insurance company and does not seek to minimize profits and seeks to mimize costs.

My questions:

(1) What is a good approach/structure to use for when solving such a case?

(2) What are the cues that led you to arriving at the proposed strucutre?

Answer 1

Hi there

One potential approach

Customers and products
Market
Revenue drivers
Cost drivers

Customers and products - main point is to understand our existing business a bit better

who are our key customers
are they shrinking or growing? what is driving the changes? (e.g., are our customers churning from the subscription)
what key products are they buying? what key health services do they need?

Market - understand if we are playing in the right position in the market

ask for segments in the market. Are there specific segments which are growing or shrinking? Are we playing in the favourable segments? Some examples: customer segments (specific age groups are growing or shrinking)
ask about competitors. Are there new entrants with different offerings that are claiming our share?

Revenue drivers

How much do we charge for the premiums? how does the premiums compare to the actual value we are delivering? (e.g., are our customers actually going to health services later? are they getting value from our health insurance plan?)

Cost drivers

How much do we have to pay as costs and what are the big items?
- e.g., how much do we pay to the health service providers when our members use it - is it impacting our margin? what are other big cost drivers for us - user acquisition, overhead?

I think asking a few questions along these buckets will help you find the root cause of the decline which will enable you to find the answer easier.