This case tests structured problem-solving and financial analysis skills through a progressive reveal format. The candidate must identify growth avenues, interpret market data, build financial models for profitability scenarios, and synthesize multiple opportunities into a prioritized framework. It emphasizes the importance of market attractiveness analysis combined with rigorous financial modeling under constraints.
Our client is a business unit within a large national health insurance company. The client focuses primarily on the higher education student health insurance market, selling medical insurance, prescription drug insurance and dental insurance to students at large universities. The client is the market leader, both in terms of customers (500K) and revenue ($500M). The overall market for higher education student health insurance is estimated at 2.5M potential customers and $2.2B in potential revenue.
This market requires a unique, two-staged sales model. The “first sale” is often made to the on-campus student health center to gain access to the student population. The “second sale” is to the students, who are the ultimate purchasers of the insurance products. In certain segments of the market, a broker may also act as an intermediary to the school.
The client’s operating margins have declined significantly in the face of aggressive competition and shrinking higher education budgets. Additionally, health care reform presents a potential risk for future growth and profitability – notably, students age 26 and under can remain on their parents’ health insurance (versus having to buy student health insurance), and health insurers will be required to spend 80% of all revenue on medical expenses. The client’s current operating margins are 9%, down from 25% five years ago.
Deloitte Consulting has been engaged to identify profitable avenues of growth for the client as a part of the client’s three-year growth strategy. Additionally, we have been asked to deliver prioritized recommendations on potential growth strategies.