Case Prompt:
A bank in Mauritius has hired you to find ways of boosting their revenues. The population of Mauritius is 1 million and the average income is $10,000 per year. How can the bank increase its revenues.
Background:
The client is a bank in Mauritius with a population of 1 million and an average income of $10,000 per year. The bank has hired the consulting firm to identify ways to increase its revenues.
Analysis:
The consulting team discussed various means of revenue generation for the bank. These included offering interest-bearing accounts targeting different parts of the market, issuing credit cards, extending financial services such as insurance or share dealing options, and expanding to other islands or territories. The team then focused on the opportunities available in the life insurance market.
The team identified several sources of competitive advantages for the bank in the life insurance market, including established trust relationships with customers, a wide reach through branch presence, access to customer account details, and the ability to cross-sell to existing customers.
To estimate the size of the life insurance market, the team assumed that those interested in life insurance are individuals with dependents who want to leave money for them in case of their passing. The team estimated that around 600,000 people in Mauritius might be interested in life insurance based on the assumption that the average marriage age is 20 and the average lifetime is 80 years.
When asked about pricing for a 25-year-old, the team calculated the present value of future earnings for 40 years at $100,000 discounted to today using a perpetuity assumption and a 10% discount rate. Assuming a 1:1000 chance of death, the cost of a payout was estimated at $100. Allowing for additional costs, profit, and adverse selection, the team suggested a price of $150, which was later negotiated to $200. Based on this price, the team estimated the total market size to be around $120 million
