How would you approach this market sizing question?
Get Active in Our Amazing Community of Over 451,000 Peers!
Market Sizing: "How big is the life insurance market in Germany?"
Overview of answers
Hi,
I would go with the "top-down" approach for this - high level - you can definitely refine it
Step 1: find a driver or proxy of the general penetration in the population for the object involved in the market sizing: in this case i would say households are a good proxy
Step 2: segment your proxy - for example here you could segment by willingness to buy excluding some categories of houselholds (e.g. based on non-affordability of the premium), substitutes (people saving by their own, etc...) and other % that reduce the "potential" market
Step 3: asses average # of policies per household - here I would say from the outside, pretty high for the german market (> 1 policy/ HH)
Step 4: multiply it all
If this is a question about the overall market - make sure to be precise in terms of the overall opportunity related to all the policies in place (the above) - otherwise if this is an annual figure for a player in the space you should take into account
1) Replacement rate of policies (how many years for a new policy to be issued?) - therefore the total opportunity should be divided using the replacement rate (e.g. if people by life insurance every 4 years then it is the above / 4)
2) Assessment of the market share (only relevant if we are talking about a single corporation inside the market)
Hope it helps
Regards
Paolo
Sorry but this only raises more questions. Why would you take households? Life insurances are not grouped per household right? Why would you furthermore work with 'replacement rates'? Insurance is not something you pay all at once at the start, rather it is characterized by the premiums which are spread over the insurance period?
(edited)