GlobalMarketOpportunityAssessmentfor
CardiovascularInsurances
1.Introduction
Aim of this report is to find the most suitable country for market entry of supplemental
cardiovascularinsurancepolicyprovider,usingtheGlobalMarketOpportunityAssessment.
We compared the market potential of four shortlisted high-income countries: USA, France,
Germany and Japan. Firstly, we provide a brief description of every prospective insurance
market with focus on demographics and country specific issues influencing potential market
entry.Lateron,usingourownmethodology,wecreatedacountryranking,whichisbasedon4
aggregatedvariables:targetmarket(sizeandvolume),cardiovasculardiseasefactorandprivate
health expenditure and provides clear overview which market is the most suitable for market
entry. In order to make the analysis more valuable, we quantify the market potential of every
countryusingaveragecostofaCriticalIllnessInsuranceintheUSAasreferenceprice.
2.Countrypresentations
2.1Japan
Japanhasapopulationofabout127.3millionpeople,ofwhich26%areolderthan65years.This
isthehighestpercentageintheworldconcerningthisagegroupandmakesJapanacountrywith
averyoldpopulation.Thisisfurtherillustratedbythemedianage,whichstaysaround46years.
Withapproximately2.14physiciansper1,000citizensandaHumanDevelopmentIndexvalueof
0.89,Japan’sdevelopmentinthehealthareahastobeconsideredslightlyabove-averagewhile
thereisstillroomforimprovement.Generally,theJapanesegovernmentspendsroughly4.700$
percapitaonhealthwhichis17.82%ofJapan’sGDP.Totalexpenditureonhealthisabovethe
averagespendingofallOECDCountries.
InJapan,19.5%ofalladultssmokedaily.Thisnumberhasbeendecreasingoverthelastyears
(27%intheyear2000).Anastoundinglylow5%ofadultsover20areobesewhichisthelowest
percentageofallOECDcountries.Inaddition,thealcoholconsumptionpercapitaperyearisalso
lessthanaveragewith7.2literspercapita.
TheJapanesehealthcaresystemismainlyorganizedandregulatedbythegovernmentthrough
the public health insurance system (PHIS). The PHIS is constituted by roughly 3500 insurers.
Employeesundertheageof75arerequiredtoenrollinthecoverageofferedbytheiremployers
ortheJapanHealthInsuranceAssociation.Theremainderiscoveredbymunicipal-run“Citizens
Health Insurance” plans. Those at age 75 and over are covered by health insurance plans
operated by insurers established in each administrative district. The PHIS is financed through
taxesandinsurancecontributions.
Voluntary supplementary private health insurance is held by the majority of the adult
population to provide additional income in case of sickness, mainly in the form of lump-sum
payments. These cash benefits are the main reason for many people to apply for a
supplementaryhealthinsurance.
In the Japanese health environment, private health insurance developed historically as a
supplement to life insurance. In the past decade, however, complementary private health
insurancepoliciessoldseparatelyfromlifeinsurancehavebeenontherise.
2.2TheUnitedStates
TheUnitedStatesofAmericahasapopulationof318.9millionofwhich13.9%areovertheage
of 65. Life expectancy in the US is at 79.56 years, which is ranked 42nd in comparison to the
world.Itprovidesroughly2.42physicians/1,000populationandtheHumanDevelopmentIndex
Valueof0,914,whichmakestheUnitedStatesrankedin5thplaceoverall.
IntheUSheartrelateddiseaseisthenumberonecauseofdeath.ConcerningtheWHOin2009
906,600peoplediedbecauseofCVD.Thisnumberoutweighedcancerthatcomeswith575,100
deaths in second place. Among the top-10 cause of deaths in America there are also found
chronic lower respiratory disease, Alzheimer’s disease, diabetes and surprisingly even suicide.
ThenumberofCVDissignificantlyhigherinsouthernstateslikeMississippi,Alabama,Arkansas,
Louisiana and Oklahoma whereas in densely populated areas i.e. New York - Newark, LA and
Chicagoareathenumbersarefairlylow.Moreovercardiovascularheartdiseasealonecoststhe
United States $108.9 billion each year. This total includes the cost of health care services,
medications,andlostproductivity.
The United States are not known for their good health care system, but rather for years of
president Obama’s battle for a reform of the present system. In the US the most well-known
health care programs are Medicare, Medicaid and the Veterans Health Administration. The
majorityofitspopulationisinsuredbytheirorafamilymember’semployer,butitisnosecret
thatthereisstillaremaininglargenumberofuninsuredpeople,tobeexact16.3%by2010.The
bigproblemthattheUSfaceistheinefficiencyoftheirsystem.AccordingtotheWHOtheUShad
theworld’shighesthealthexpenditure,namely17.9%oftheGDP.Atthesametimethough,the
systemfailstoachievebetterhealthcareoutcomesthanothercountriesandisoftenrankedlast
concerning the system’s performance. A 2004 Institute of Medicine (IOM) report said: "The
United States is among the few industrialized nations in the world that does not guarantee
accesstohealthcareforitspopulation."EventhoughObamacaremanagedtolowerthenumber
ofuninsuredpeopleabit,thequalitygotworseovertheyears.Thatisalsothereasonwhythe
majority of insured US citizens hold expensive private insurance simply because public basic
insurancedoesnotcovermuch.
2.3France
Francehasanagingpopulationofmorethan66million,where18%are65andolder,aswellas
one of the highest annual population growth rates (0,44%) in Europe. It features, high GDP,
standardoflivingendequaldistributionofincome,thuscreatingsizeablepotentialmarketfor
privatehealthinsurance.Weestimatedthismarkettoamount65,8billionUSD.
Francehasoneofthemostsophisticatedhealthcaresystemsintheworld,rankedfirstinWHO
rankingofhealthsystems.TheFrenchsystemcombinesprivateandpublicfinancingtoprovide
universalhealthcoveragetoeveryone.
PublicpartisrepresentedbyCMU(CouvertureMaladieUniverselle)schemeintroducedin2000,
which is based on reimbursement of medical expenses to all legal residents of France. It is
financed by employers, employee contributions, and personal income taxes. Reimbursement is
settoabout70%ofwhatCMUexpectsaproceduremightcost,notwhatitactuallycosts.Drug
costsarereimbursedatarateof15,30,65and100%dependingontheirperceivednecessity.
While France has a universal public health insurance system, the coverage it provides is not
completeandapproximately23%ofhealthcareexpendituresareprivate.Thiscreatesasizeable
marketforPrivateHealthInsurance(PHI)providers.PHIhasasupplementaryroleandcovers
discrepancybetweenCMUreimbursementsandactualcostsoftreatment.Currentlyabout88%
ofthepopulationhasprivatehealthinsurance.HoweverFrenchPHImarketischaracterizedby
fragmentation with 991 insurance companies, where top 10 make just 25% of the whole turn
over.Inaddition,accordingtotheLSEreport,thismarketisconsideredtobealmostsaturated.
Despite the fact, that it has relatively high prevalence of smoking (23,9%) and alcohol
consumption (12,2 l/year per capita), both considered as primary causes of Cardiovascular
healthproblems,Francehassurprisinglytheworldslowestheartdiseasedeathrate.Thisfactin
particulardecreasesthepotentialofthismarketforourcase.
Tosumup,Francehasarelativelyold,wealthyandunhealthypopulation,butitshealthsystem
isdominatedbystateinsuranceschemesandtheprivateinsurancemarketissaturated,sothe
potential margins for us would be low and profits rather difficult to achieve. As the case
specializes in providing cardiovascular insurance, the fact that France is the least affected
countrybythissortofdiseasesfurthercontributestoassumptionthatfocusonanothermarket
wouldbemoresuitable.
2.4Germany
Withapopulationofalmost82millionpeopleandanaveragelifeexpectancyofaround81years,
Germany has a high amount of elderly population aged 65 and older are about 17%. Its high
HumanDevelopmentIndexvalueof0.911indicatesthatGermanyisinfactahighlydeveloped
country. The German health system provides on an average 37 physicians per 10,000 citizens
and11.30%oftotalgovernmentexpenditureisspentonhealth.Everycitizenhastobeinsured,
either by public or by private schemes. Currently 9 million people in Germany have a private
basicinsurance.
Datarecordeddepictedthattheobesityrateisabout25%,whileonly40%ofGermansexercise
regularly. This entails many risks of suffering from CVD. According to the latest WHO data
published in April 2011 coronary heart disease deaths in Germany reached 24.49% of total
deaths.
SinceallGermancitizensarealreadyobligatorilyinsuredbyahealthinsurance,whichcoversat
leastbasiccardiovasculardiseasetreatments,themarketforourfirmisveryslim.Manyofthe
Germanprivatehealthinsurancesalreadycoveradvancedcardio-vascularcareorprovidethese
offers in cheap additional packages. Concerning the market for additional insurance,
competition is very fierce. 22.50 million Germans have such an additional insurance. The ten
biggest insurance providers in Germany are all domestic companies. An unknown foreign firm
mighthaveproblemstoacquirenewinsurantholders.
3.Calculations
Thefirstcalculationwedidwasonthesizeofthetargetmarket.Weconsidered50percentof
the population between 15 and 64 our target group. We chose 50 percent due to the fact that
peoplenormallystartthinkingaboutinsurancesassoonastheystartfamilyplanning,whichis
estimated to be in the early 30s. Moreover, we used the HDI and the poverty rate as major
factors for calculating the buyers’ potential meaning weather the population is able to afford
such private insurance. Also, we included the population growth rate since this gives us
informationaboutlong-termtrendsofthepopulationstructure.
Thesecondcoefficientwefocusedonwasthetargetmarketintermsofmoney.Consideringthat
we multiplied each country’s GDP with the expenditure on private health insurance (in
percentage).
Furthermore, we tried to calculate the probability of each country’s population to suffer from
CVD. Therefore, we took into consideration the prevalence of smoking, obesity, alcohol
consumption and physical activity to equal parts as well as the presence of physicians for the
populationto5percent.Relatedtoourresearchthisfiguredoesnotsaymuchaboutthechances
of suffering from CVD, but physicians could inform the population about a person’s individual
chanceandgiveadviceonhowtopreventcardiovasculardisease.
Lastbutnotleastwealsocollectedinformationonprivatehealthexpenditureineachcountry.
Wefoundoutthattherearevariationsfromcountrytocountrydependingonthebasichealth
systemineachoftheobservedcountries.IntheUS,forexample,thegovernmentdoesnotreally
providehealthinsuranceandthereforethemajorityiscoveredprivately.InJapan,ontheother
hand,thegovernmentprovidesitspeoplewithgoodhealthinsuranceandsofewerpeoplespend
moneyonprivateinsurance.
4.Pricing
We based our price calculation for the CVD Insurance on the average cost of a Critical Illness
Insurance in the USA. These two types of insurance are comparable as both are covering the
onset of severe diseases. Furthermore, since our target countries are among the most
prosperousintheworld,wecanusethesamedefaultpriceineverycountry.Thedefaultpriceis
a hypothetical price that would be charged in a country with a CVD and Private Expenditure
Coefficientof1.Besides,weraisethepriceby25%every5years.
Weighting
Peopleunder30usuallydonotthinkaboutinsuringthemselves.Theyalsodonothavealotof
money.Thatiswhyweweightedthemwithonly5%.Typicallyafteraroundtheageof35,people
start to think about taking precautions against certain diseases. Therefore we expect the
majority of our insurance sales in the age group between 35 and 54. Also, we estimated a
smallernumberofpeopletobuyacardiovascularinsuranceaftertheageof60.Basedonthefact
thatmostpeopleinthisagegroupeitherarealreadycoveredproperly,orwouldnoteffectsuch
aninsurance.
Country-specificpricecalculation
In order to calculate the appropriate prices for each country and age group we used the
following formula: (Default Price*CVD Coefficient) + (Default Price*Private Expenditure
Coefficient)/2.Duetotheproblemofadverseselection,wechargemoreinacountrywherethe
probability to suffer from a cardiovascular disease is higher. Furthermore, the Private
Expenditure Coefficient indicates the demand in the population for private health insurance.
Thereforewechargemorewhenthedemandishigher.
Weighted
Age
Default
Price
Japan
USA
France
Germany
CVDInsuranceAveragePrice(peryear)
5,00% 10,00% 15,00% 20,00% 20,00% 15,00% 10,00% 5,00% Average
<30
30-34 35-39 40-44 45-49 50-54
55-59
60-64
15-64
$130
$79
$128
$93
$93
$163
$98
$161
$116
$116
$203
$123
$201
$145
$145
$254
$154
$251
$182
$181
$317
$192
$313
$227
$227
$397
$240
$392
$284
$283
$496
$300
$490
$355
$354
$620
$376
$612
$443
$442
$308
$186
$304
$220
$220
MarketPotential
Japan
$5.491.297.920
USA
$24.999.559.523
France
$3.816.496.060
Germany
$4.508.623.868
5.Conclusion
Toestimatethemarketpotentialandtogiveareliablerecommendation,whichcountryisbest
toconsiderforamarketentry,wedecidedtoevaluatethemarketattractivenessbytakingalook
at 4 major factors: the target market in terms of size, the target market in terms of money,
privatehealthexpenditurecoefficientandcardiovasculardiseasecoefficient.Foreachfactorwe
usedthehighestfigure,whichisworth1,asthestandardandputtheothercountriesinaratio
to the highest figure accordingly. Further on we weighted these factors according to their
importance to our case. The total points show us the most profitable and attractive market to
enter.Thecalculationsledtothefollowingresult:
Weighted
Country
Japan
USA
France
Germany
15,00%
Target
Market
(Size)
0,3580
1,0000
0,2108
0,2496
30,00%
30,00%
25,00%
Target
Private
Market
CVDFactor Expenditure
(Value)
Coefficient
0,0516
0,8796
0,3323
1,0000
0,9754
1,0000
0,0408
1,0000
0,4304
0,0585
0,9819
0,4455
ΣAllfactors
RANKING
0,4161
0,9926
0,4515
0,4609
4
1
3
2
We consider the overall market potential and the cardiovascular disease factor as the most
importantdriversfortheindustrypotential.Therefore,weweightedthemwith30%eachand
valuedtheothertwofactorswith25%and15%.Thisleadstotheresult,thattheUnitedStatesis
the most attractive country for cardiovascular insurance opportunities. In three out of four
categoriesitrankswiththehighestamountpossible.
Inconclusion,theUnitedStatesillustratesthebestmarketpotentialcomparedtotheotherthree
countriesandshouldbeconsideredforbusinessexpansion.
6.Data
Variable
Comment
Population
in mill. (2013)
127,3
318,9
66,3
81,0
HDI
2013
0,890
0,914
0,884
0,911
Adult literacy 15+
2005-2012
99%
99%
99%
99%
Population age 65+
in mill.
31,825
44,646
11,934
17,010
Health expenditure
in % of GDP
10,10
17,90
11,70
11,30
Private expenditure on
health
In % of total exp. on
health
17,82
53,63
23,08
23,89
GNI per capita (PPP)
In USD (2012)
37.630
53.960
37.580
44.540
Est. Population growth
from 2014 to 2030
2014-2030
-0,13%
0,77%
0,45%
-0,18%
Life expectancy
in years
83
79
83
81
Current tobacco
smoking population
in % (adults 15+)
2012
19,5
15,5
23,3
21,9
Pure Alcohol
consumption among
adults
(15+) in litres per
capita per year
(2008-2010)
7,2
9,2
12,2
11,8
Age- standardized
obesity rate, adult
(% of population)
20+ (2008)
5,00
33,00
18,20
25,10
Physicians per 10,000
people
(2003-2012)
21,4
24,2
33,8
36,9
GDP per capita
in USD (2012)
38.492
53.143
41.421
45.085
Poverty rate
in % 2012
16,0
15,1
7,9
15,5
Japan
USA
France
Germany
7.Sources
Worldbank
CIAWorldFactbook
OECDStatistics
http://who.int/
http://www.cdc.gov/
http://hdr.undp.org/en/data
http://www.medicalnewstoday.com/articles/282929.php
http://www.commonwealthfund.org/publications/fund-reports/2014/jun/mirror-mirror
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http://www.economist.com/news/business/21591858-fuss-over-obamacares-teethingtroubles-obscuring-bigger-story-investors-american
http://www.oecd.org/els/health-systems/Briefing-Note-JAPAN-2014.pdf
http://gesundheit-zahlen-daten-fakten.blogspot.co.at/2012/05/anzahl-der-privatversichertenwie-viele.html
http://www.worldlifeexpectancy.com/germany-coronary-heart-disease
LondonSchoolofEconomicsHealthandSocialCare2009–ReportonPrivatehealthinsurance
intheEuropeanUnion
http://www.criticalillnessinsuranceinfo.org/learning-center/individuals.php
http://www.telegraph.co.uk/health/expathealth/8251102/Expat-guide-to-France-healthcare.html
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