Consumer Exchange Simulation

With this tool, users (typically, payors) design a suite of insurance products that can then be sold on a simulated online exchange. Consumers browse the exchange, which highlights information on premiums, deductibles, coverage tiers, and other key product attributes, before making a selection. As of the end of 2012, nearly 150,000 consumers across the United States had participated in simulations. On average, it takes each consumer about 25 minutes to complete the process.

The exchange simulation collects a wide range of demographic data about the participating consumers, as well as information on their current coverage, health status, and prior purchase behavior. Thus, the simulation allows users to:

  • Assess the impact of different product attributes (including brand name, price points, network designs, and availability of dental care or other additional services) on consumer buying preferences and choices
  • See what types of consumers purchased their products, as well as the types that preferred competitors’ products
  • Estimate how their product offerings would fare in terms of revenue, margin, medical loss ratio, and market share in a real market
  • Understand local market dynamics, competitive issues, and the effect of subsidies on insurance choices

The “real” consumer feedback gives users unique insights into consumer preferences and what their behavior on the exchanges is likely to be, information that is not available through any other source.

Several payors have already used the McKinsey Consumer Exchange Simulation to support product design, off-exchange strategies, and strategies for handling the transition of existing members from employer-sponsored insurance to individual plans.