Cigna Entrepreneurial Opportunities: Insurance Diversification

Cigna should consider offering insurance products beyond health insurance. For instance, the company could venture into property insurance, fire insurance, or even political violence insurance (PVT). This is especially relevant given that such diversification would insulate the company from shocks that specifically affect the health insurance sector. For example, if adverse regulations relating to health insurance were to be enacted, Cigna would likely weather that disruption without having its bottom line significantly affected.

Cigna should also consider diversifying into markets outside of the insurance industry — without necessarily exiting insurance altogether. For instance, the company could seek to acquire a majority stake in 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 a PEST analysis indicates, could be impacted by various economic, political, and social factors. 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).

As revealed by the PEST analysis, available data suggests that age is a critical factor in the uptake of health insurance. 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 mindful of this, Cigna could develop insurance products designed to bring this particular market segment 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 targeting newly employed young adults. The proposed product would incorporate services specifically relevant to young persons, including fitness and weight-loss support, smoking cessation services, pregnancy care, cholesterol checks, and elective cosmetic surgery.

The entrepreneurial opportunity selected from those assessed above is venturing into insurance products other than health insurance. There are various options Cigna could pursue, including — but not limited to — property insurance, fire insurance, political violence insurance, and marine insurance. This opportunity is viable for several reasons.

First, Cigna currently has a strong network spanning all 50 states. The company also maintains a vast global network with sales offices in multiple locations across the world, including the Middle East, Asia, Europe, and North America. This gives the company ready access to markets in which to roll out additional insurance products, meaning Cigna would not face significant entry barriers — which would ease the introduction of the new product lines highlighted.

Second, by rolling out additional products outside of its current health insurance portfolio, Cigna would effectively insulate itself from the external factors and occasional shocks — beyond its control — that impact health insurance. For instance, the government could introduce legislation that specifically affects health insurance, as was the case following the passage of the Affordable Care Act. Among other things, that legislation made it unlawful for health insurance companies to impose both lifetime and annual coverage limits on the amount of coverage offered. 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 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." Cigna has been in operation for over 37 years, since its establishment in 1982. Its dedication to improving the health and wellbeing of the millions of customers it has served over the last three decades means that both existing customers and the general public can identify with the Cigna brand through its various slogans, logos, and other visual cues. The distinctive tree image and green-blue color combination in its logo are easily recognizable. This makes it considerably easier for the company to introduce new products to the same clientele it already serves. Indeed, as Burrow and Kleindl (2014) observe, "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).

There are various trends affecting the global health insurance business environment. Three of these are considered here: technology, consolidation, and new entrants.

Trends in technology have a significant impact on most industries, and 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." Safi identifies a number of disruptive technologies affecting health insurance providers worldwide, two of which are mobile solutions embedded on mobile devices and cloud computing.

Regarding new entrants, there is little 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 (Macrotrends, 2020). This represents an increase in profitability of 4.9%, 16.37%, and 215.65% over the three-year period. The increase in profitability is not unique to Cigna alone. 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." Among those that have entered the health insurance market within the last few years is Oscar Health, a startup that benefited from the backing of Alphabet.