This case tests market sizing, financial analysis using insurance-specific metrics (Combined Ratio), and strategic thinking. The key insight is recognizing that while agent distribution is initially more profitable in Year 1, the website channel becomes superior due to one-time development costs and higher customer acquisition, requiring candidates to think beyond first-year financials.
Insuraco is a large US insurer that’s looking to grow. They currently sell a wide range of insurance products to US consumers and are considering developing a new product: $5/month smartphone insurance for under-30s.
Insuraco’s management is excited about the opportunity of selling to this large, under-insured group. However, before they develop the idea further, they’d like to know whether this is indeed a good idea, and, if so, how they should roll-out this new product.