Entrepreneurial Opportunities MBA 515 Milestone 4

MBA MILESTONE 4: ENTREPRENEURIAL OPPORTUNITIES

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ENTREPRENEURIAL OPPORTUNITIES

MBA 515 Milestone 4: Entrepreneurial Opportunities

Entrepreneurial Opportunities

Venture Into Other Insurance Products Other than Health Insurance

Cigna should consider offering other insurance products other than health insurance. For instance, the company could venture into property insurance, fire insurance, or even property and political violence insurance (PVT). This is more so the case given that this would to some extent insulate the company against shocks that specifically impact the health insurance sector. For instance, if adverse regulations relating to health insurance were to be enacted, then Cigna would likely ride the wave without necessarily having its bottom-line significantly affected.

Diversify by Acquiring Majority Stake in Other Non-Insurance Businesses

Cigna should also consider diversifying into other markets outside of the insurance industry - without necessarily exiting the insurance business. For instance, the company could seek to acquire majority stake in companies or enterprises offering services such as security or food distribution. The rationale behind this proposal is that Cigna would avoid being too reliant on revenue streams sourced from the insurance business model which, as the PEST analysis indicates, could be impacted upon by various factors on the economic, political, and even social realms. Burrow and Kleindl (2014) note that diversification “aims to maximize returns by investing in different areas that would each react differently to the same event” (p. 113).

Roll out Health Insurance Products that Would Appeal to the Younger Population

As has been revealed by the PEST analysis, available data suggests that in as far as the uptake of health insurance is concerned, age is a critical factor. This is more so the case given that as Cantiello, Fottler, Oetjen and Zhang (2015) observe, the least likely age group to take health insurance is the 18-24 years age category. Being cognizant of this fact, Cigna could develop insurance products designed to bring this particular segment of the market on board. Ideally, this would be a plan independent of the health plans that typically offer coverage to dependents. An example would be a product that targets newly employed young persons. Thus, the proposed product would in this case incorporate services that are specifically relevant to young persons. These would ideally be inclusive of: fitness (i.e. weight loss help services), smoking cessation services, pregnancy care, cholesterol checks, elective cosmetic surgery, etc.

Entrepreneurial Assessment

The entrepreneurial opportunity selected from the list assessed above is venture into other insurance products other than health insurance. On this front, there are various options that Cigna could select from. These are inclusive of, but they are not limited to; property insurance, fire insurance, political violence insurance, marine insurance, etc. The opportunity highlighted in this case is viable for a number of reasons. To begin with, it is important to note that at present, Cigna has a strong network spanning 50 states. Further, the company also has a vast global network with sales offices in multiple locations across the world including; the Middle East and Asia, Europe, and North America. This gives the company ready access to the said markets to roll out other insurance products. Thus, Cigna would not be facing significant entry barriers in such markets – which would ease its introduction of the other insurance products highlighted.

Secondly, in rolling out additional products, outside of the health insurance products that the company has in its product portfolio at present, the company would be effectively insulating itself from the various factors and occasional shocks (outside its control) that impact health insurance. For instance, the government could introduce legislation that specifically impacts health insurance, i.e. as was the case following the passage of the Affordable Care Act. Amongst other things, this particular legislation made it unlawful for health insurance companies to impose both lifetime as well as annual coverage limits on the offered insurance coverage amount. In the words of Wilensky and Teitelbaum (2019), “without annual or lifetime limits, insurers were required to pay out more in claims than they would have otherwise” (p. 79). This would essentially have a negative impact on profitability.

Third, the opportunity suggested could also be deemed viable given that the company also possesses strong brand recognition. Brand recognition has been defined by Kenton (2018) as “the ability of consumers to identify a specific brand by its attributes over another one.” It is important to note that Cigna has been in operation for the last 37 years, since its establishment in 1982. Its dedication to the improvement of the health as well as wellbeing of the millions of customers it has served over the last three decades means that those the company has impacted (as well as the general public) can identify with the Cigna brand via the various slogans as well as logos and other visual cues associated with the company. The distinctive tree image and green-blue color combination in its logo could be easily be recognized on this front. This effectively makes it easy for the company to introduce the suggested products to the very same clientele it serves (or the general public). Indeed, in the words of Burrow and Kleindl (2014), “when you already have a strong brand and loyal customers, it is often easier and less expensive to introduce new products or test them out before you further invest in them” (p. 214).

Trends

There are various trends affecting the health insurance global business environment. Three of these will be taken into consideration: technology, consolidation, and new entrants.

Trends in technology happen to have a huge impact on most industries and sectors. The health insurance domain is no different. According to Safi (2020), “the health insurance industry, across the world, is going through a wave of digital transition, representing a new era of healthcare consumerism.” The author identifies a number of disruptive technologies that have an impact on health insurance service providers across the world. Two of the listed technologies are mobile solutions (embedded on mobile devices), and cloud computing.

Regarding new entrants, there is no doubt that health insurance is a profitable venture – with players in the market reporting growing profitability. For instance, Cigna’s profits over the last three years have been on the increase. For the years 2017 2018, and 2019, the company registered annual revenues of $41.806 billion, $48.65 billion, and $153.566 billion respectively (Microtrends, 2020). This represents an increase in profitability of 4.9%, 16.37% and 215.65% respectively over the three year period. The increase in profitability is not unique to Cigna alone. As a matter of fact, many other health insurance companies with global presence have reported increased profitability in recent times. As a matter of fact, as Abelson (2020) points out, “some of the largest companies, including Anthem, Humana, and UnitedHealth Group, are reporting second-quarter earnings that are double what they were a year ago.” Some of those that have thrown their hat into the health insurance ring within the last two years are Oscar Health (which is a new startup in the realm of health insurance that benefited from the backing of Alphabet).

Next, when it comes to consolidation, Dafny (2015) points out that “big insurers are taking a break from the new — figuring out how to pay for value, rather than volume, of care — and going for the tried and true: gobbling up smaller insurers.” In basic terms, consolidation has got to do with the combination of a number of enterprises to form a bigger entity. There are a number of advantages that players in the health insurance realm seek to reap by embracing consolidation. One such benefit is the reduction of operational costs. Consolidation also enables health insurance companies to go around certain challenges, i.e. barriers to entry in certain geographical markets. With ever increasing competition in this particular market domain, as has been highlighted above, consolidation is a trend that will continue shaping the health insurance market going forward.