Is anyone able to help with the calculation that goes into the Insurance Case study from Wharton 2017 Casebook?

Question

I am getting a much larger number and I was hoping someone could clarify where I may have went wrong if you can get the same answer as listed below.

Answer 1

Hi Alek,

My best guess here is that the case answer is incorrect since I get a total market size of $7.5B if the market is defined as strugglers + aspirers

Strugglers: $2,000 * 2% * 33M = $1,320,000,000

Aspirers: $7,500 * 1.5% *55M = $6,187,500,000

Seems that they only included the aspirers market size in the answer.

-A

Answer 2

Hi,

You need to add strugglers here : $2k * 2% * 33M = $1,32 Bn

However, willing to spend is not exactly the size of the market but more the potential !

Next step is to ask if all potential is addressed or not, effective market size could therefore be lower than that.

Best,

David

Answer 3

Hello,

You are right, the proposed solution is wrong. 6 billion is the potential market of the Aspirers segment, you need to add the strugglers one.The right solution is:

Market size= Aspirers market + Strugglers market = 6.2 Billion + 1.3 Billion = 7.5 Billion

Best,
Luca

Answer 4

Agree with you.

The 6 Bn only includes the aspirers, altough -in my reasoning- you should add on top the 1.5 Bn strugglers.

Hope it helps!

Cheers,

Clara

Answer 5

Hi Alek,

Agree with the rest.

Do note that most casebooks have one or two mistakes - it's quite common...they were written by humans after all!