An Innovative Approach to Segmentation for a Changing Insurance Industry

Posted by Mark Carr on Tue, Mar 13, 2012

Segmenting the health care market CMBThe 2014 implementation of many of the Affordable Care Act’s (ACA) key provisions has sparked a great deal of speculation about the future of the healthcare market; there seems to be no end to the models predicting how the law will impact the insurance industry. There is no question that reform will shift the health insurance industry to a more retail based model, and in the process challenge traditional insurers to develop new consumer oriented capabilities.  A vital piece of planning for this shift will require understanding changes in consumer decision-making. The traditional approach of health insurers to segmenting the market is unlikely to provide the kind of insight necessary to win in an industry facing such fundamental regulatory, economic, and cultural change.

Traditional segmentation approaches cut the consumer market by demographics (e.g. age, gender) or funding source (e.g. who pays).  This approach was appropriate in years past when there was relatively little competition, differentiation, and when choice was limited. However, the insurance industry’s move to a more complex and competitive model requires a more nuanced understanding of customer needs and differentiators. The newly minted college grad indeed has different needs from their parents moving toward retirement or the young professional starting a family. This is proven out in some recent research we conducted.

To get a better sense of insurance consumers and their preferences, CMB and the South Street Strategy Group analyzed the responses of nearly 1,500 Americans over the age of 18, surveyed as part of CMB’s Consumer Pulse Program.  We then segmented the market by plan features and found five distinct segments that illustrate the needs and goals people have for their insurance coverage.

The segments we found are defined not solely by age or insurance source but by the needs and goals people have for their insurance coverage, and provide far more insight than traditional methods. For example one large segment, who we’ve termed “e-Patients” are the most interested in managing their healthcare or “visiting” their doctor online.  They’re price sensitive, want out-of-network coverage and are willing to switch primary care providers to get the benefits they want. Knowing the attributes of this and other significant segments of the insured population is invaluable to insurance providers who are facing an increasingly customer-centric industry.

Health Insurance SegmentationTo learn more about our approach and see more detailed profiles of the other segments click here.

Posted by J. Mark Carr, Mark is co-founder and managing partner of South Street Strategy Group.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies. 

Topics: South Street Strategy Group, Health Insurance Research, Consumer Pulse, Market Strategy & Segmentation