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1

How to estimate the number of insurance brokers in Germany?

Hey there,

I recently had to solve the following market sizing question:

"Estimate the number of independent insurance brokers in Germany"

My approach:

  1. Clarify the scope of the market sizing (here: only independent insurance brokers, assumption single brokers, private households)
  2. Estimate the number of insurance policies of private households (80m people, average household size of 3 - 27m households, average policies per household - 13-14 based on available insurance types and assumption that 2 adults per household and one children = c. 380m policies)
  3. Estimate the share of independent insurance brokers (~30%, other channels would be single firm/multifirm agencies, direct distribution/internet/apps = thus insurance brokers have to administer 30% or ~130m policies )
  4. Estimate the available capacity per insurance broker (assumption: 220 days of work, 9 hours per day = 1980 hours per year, thereof - split of activities: 20% for check of claims, 30% for administrative tasks, 20% for customer care, 30% for policy acquisition)
  5. Identify number of new policies (assumption: households change their policies every 4 years - thus 130m/4yrs = ~33m new policies per year)
  6. Calculate the number of insurance brokers (each insurance broker has 30% time for policy acquisition, thus 30% of 1980 hours = ~600 hours; 33m new policies, which on average require one hour of consultancy mean 33m required hours/600 available hours per broker = ~ 55,000 brokers)

Would that work in your opinion? Official number is 48,000.

Thanks in advance.

Best,

A

Hey there,

I recently had to solve the following market sizing question:

"Estimate the number of independent insurance brokers in Germany"

My approach:

  1. Clarify the scope of the market sizing (here: only independent insurance brokers, assumption single brokers, private households)
  2. Estimate the number of insurance policies of private households (80m people, average household size of 3 - 27m households, average policies per household - 13-14 based on available insurance types and assumption that 2 adults per household and one children = c. 380m policies)
  3. Estimate the share of independent insurance brokers (~30%, other channels would be single firm/multifirm agencies, direct distribution/internet/apps = thus insurance brokers have to administer 30% or ~130m policies )
  4. Estimate the available capacity per insurance broker (assumption: 220 days of work, 9 hours per day = 1980 hours per year, thereof - split of activities: 20% for check of claims, 30% for administrative tasks, 20% for customer care, 30% for policy acquisition)
  5. Identify number of new policies (assumption: households change their policies every 4 years - thus 130m/4yrs = ~33m new policies per year)
  6. Calculate the number of insurance brokers (each insurance broker has 30% time for policy acquisition, thus 30% of 1980 hours = ~600 hours; 33m new policies, which on average require one hour of consultancy mean 33m required hours/600 available hours per broker = ~ 55,000 brokers)

Would that work in your opinion? Official number is 48,000.

Thanks in advance.

Best,

A

(edited)

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Hi, The approach is super specific and very good!

Just make sure you can make all the calculation quite quickly and managing complex numbers. The reasoning behind is the most important thing in a market size question. If the reasoning is good, the final number matter the less (off course it matters... and usually if the reasoning is good the number is not completely "out"... as you have verified also by yoirself).

The most important thigns I would keep in mind are:

1) try to be as deep as possible in making the assumptions and the steps, while ensuring you don't go over 20 mins in solving the case

2) round numbers during your canculation is usually a good approach. Again you are not valuated as a "calculator". You should know how to make your math and you should not make errors... but rounding is not a problem

3) Make sure to drive the interviewer through your thinking step by step. This is the most important thing, as also our approach is long and not super-easy. So do not make mental assumptions, but explain every step to the interviewer

Best luck with your next steps!

Luca

Hi, The approach is super specific and very good!

Just make sure you can make all the calculation quite quickly and managing complex numbers. The reasoning behind is the most important thing in a market size question. If the reasoning is good, the final number matter the less (off course it matters... and usually if the reasoning is good the number is not completely "out"... as you have verified also by yoirself).

The most important thigns I would keep in mind are:

1) try to be as deep as possible in making the assumptions and the steps, while ensuring you don't go over 20 mins in solving the case

2) round numbers during your canculation is usually a good approach. Again you are not valuated as a "calculator". You should know how to make your math and you should not make errors... but rounding is not a problem

3) Make sure to drive the interviewer through your thinking step by step. This is the most important thing, as also our approach is long and not super-easy. So do not make mental assumptions, but explain every step to the interviewer

Best luck with your next steps!

Luca

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