Problem Definition
ShieldInsure is a US-based property and casualty insurer writing $1.4 billion in annual gross written premiums. For decades the company thrived through a network of 3,200 independent agents, earning a reputation for reliable coverage and strong broker relationships. However, over the past four years, a wave of insurtech competitors offering instant quoting, usage-based pricing, and AI-powered claims processing has eroded ShieldInsure's competitive position. The company's market share in personal lines has declined from 4.8% to 3.6%.
The financial impact has been severe. ShieldInsure's combined ratio has deteriorated from 95% in 2020 to 102% in 2024, meaning the company now loses two cents on every dollar of premium it underwrites. The expense ratio has climbed to 35% -- well above the peer average of 30% -- driven by manual claims handling, legacy IT systems, and rising agent commissions. Meanwhile, insurtechs have driven their combined ratios below 92% by automating underwriting and claims.
The CEO has retained your firm to evaluate three strategic options: (1) build digital capabilities in-house for $180 million over three years, (2) acquire an insurtech platform for $250-400 million, or (3) enter a technology partnership with an existing platform vendor. What strategic path should ShieldInsure pursue, and how should it sequence investments to return to underwriting profitability within three years?
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- ShieldInsure's loss ratio is 67% (vs. 62% peer average), driven by slow fraud detection and inefficient claims triage
- The expense ratio is 35% (vs. 30% peer average), with claims processing accounting for $168 million annually
- The company processes 300,000 claims per year at an average cost of $560 per claim
- Current auto-adjudication rate is 12%, compared to 78% at leading insurtechs
- Customer retention has fallen from 87% to 79% over three years
- Investment income of $95 million partially offsets underwriting losses
- The company has $320 million in available capital and a debt-to-equity ratio of 0.4x
- Technology staff represents only 8% of headcount (vs. 22% at insurtechs)
Question 1Structuring
Prompt: "How would you structure your analysis to advise the CEO on ShieldInsure's digital transformation strategy?"
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
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Share if the candidate asks:
- ShieldInsure operates in 28 states with concentration in the Midwest and Southeast
- Personal lines (auto, home) represent 62% of premiums; commercial lines 38%
- The company's NPS score has dropped from 42 to 28 in three years
- Three board members have publicly advocated for the acquisition path
- The CEO has a mandate to show profitability improvement within 18 months
- Legacy policy administration system is 14 years old and runs on COBOL mainframes
- Annual IT maintenance spend is $62 million, of which 78% goes to keeping legacy systems running
- Two acquisition targets have been identified: QuoteFast (instant quoting, $250M valuation) and ClaimsAI (claims automation, $180M valuation)
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A strong structure addresses four areas:
-
Diagnose the profitability gap -- Decompose the 102% combined ratio into loss ratio (67% vs. 62% peer) and expense ratio (35% vs. 30% peer). Identify which components are digitally addressable vs. structural.
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Evaluate strategic options -- Score build, buy, and partner against: time to impact, total cost of ownership, integration risk, talent acquisition, and cultural fit. Apply the 18-month profitability constraint as a filter.
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Channel strategy -- Assess how each option affects the agent network, digital direct, and insurtech platform channels. Determine which customer segments to serve through which channels.
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Sequencing and quick wins -- Identify moves that improve the combined ratio within 12 months (claims automation, fraud detection) vs. longer-term platform plays (usage-based pricing, real-time underwriting).
Common pitfall: Candidates who jump straight to "build vs. buy vs. partner" without first diagnosing the root cause. The combined ratio is a symptom -- strong candidates decompose it before evaluating solutions.
Probing questions if candidate stalls:
- "You mentioned the combined ratio. Can you break that down further?"
- "What role does the existing agent network play in your analysis?"
- "How does the 18-month board mandate change your approach?"
What the interviewer is looking forShow guidanceHide guidance
Good: Candidate identifies cost reduction and revenue protection as two key dimensions. Mentions the build/buy/partner decision. Considers financial feasibility.
Strong: Candidate structures around four pillars: (1) root cause of combined ratio deterioration (loss ratio vs. expense ratio drivers), (2) evaluation criteria for the three strategic options (cost, speed, risk, capabilities gained), (3) impact on existing distribution channels (agent network), (4) implementation sequencing and quick wins. Recognizes that the 18-month mandate constrains option selection.
Excellent: Candidate adds a "right to win" lens -- what capabilities does ShieldInsure already have that create advantage in digital? Identifies that the real question is not just cost reduction but whether ShieldInsure can build a differentiated digital proposition or will become a commodity carrier. Raises the tension between protecting the agent channel (which drives retention) and shifting to digital acquisition. Notes that the combined ratio problem is structural, not cyclical, requiring the analysis to separate near-term fixes from long-term platform investment.
Question 2Numeracy
Prompt: "Let's quantify the financial case for digital claims transformation. Using the data provided, calculate the annual savings from digitizing claims processing, then determine the simple payback period for the build option. Assume digital transformation moves the auto-adjudication rate from 12% to 60%."
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
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| Metric | Current State | Post-Transformation |
|---|---|---|
| Total claims per year | 300,000 | 300,000 |
| Auto-adjudicated claims | 12% (36,000) | 60% (180,000) |
| Manual claims | 88% (264,000) | 40% (120,000) |
| Cost per auto-adjudicated claim | $120 | $80 |
| Cost per manual claim | $620 | $580 |
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Step-by-Step Solution
Current annual claims cost:
- Auto-adjudicated: 36,000 x $120 = $4.3M
- Manual: 264,000 x $620 = $163.7M
- Total: $168.0M
Cross-check: $168M / 300,000 = $560 per claim average (matches Additional Information)
Post-transformation annual claims cost:
- Auto-adjudicated: 180,000 x $80 = $14.4M
- Manual: 120,000 x $580 = $69.6M
- Total: $84.0M
Annual savings: $168.0M - $84.0M = $84.0M
Impact on combined ratio:
- $84M savings on $1.4B premiums = 6.0 percentage points
- New combined ratio: 102% - 6% = 96% (return to underwriting profitability)
Simple payback period for build option ($180M):
- Assuming linear ramp: Year 1 at 30% savings ($25.2M), Year 2 at 70% ($58.8M), Year 3 at 100% ($84.0M)
- Cumulative by end of Year 2: $25.2M + $58.8M = $84.0M
- Cumulative by end of Year 3: $84.0M + $84.0M = $168.0M
- Remaining: $180M - $168M = $12M, recovered in ~2 months of Year 4
- Payback period: approximately 38 months (just over 3 years)
Reality check: $84M annual savings represents a 50% reduction in claims processing cost. Industry benchmarks show 40-55% cost reduction from claims automation, so the estimate is aggressive but within range.
Bonus calculation (share if candidate finishes quickly):
"Now compare the build option to the acquisition option. Assume acquiring an insurtech costs $320 million but delivers the same $84 million in annual savings starting 12 months earlier (full savings in Year 2 instead of Year 3). Which option has a better 5-year cumulative return?"
| Year | Build Savings | Build Cumulative | Acquire Savings | Acquire Cumulative |
|---|---|---|---|---|
| 1 | $25.2M | $25.2M | $50.4M | $50.4M |
| 2 | $58.8M | $84.0M | $84.0M | $134.4M |
| 3 | $84.0M | $168.0M | $84.0M | $218.4M |
| 4 | $84.0M | $252.0M | $84.0M | $302.4M |
| 5 | $84.0M | $336.0M | $84.0M | $386.4M |
- Build: $336M cumulative savings minus $180M investment = $156M net value
- Acquire: $386M cumulative savings minus $320M investment = $66M net value
- Build delivers $90M more net value over 5 years despite slower ramp
Key insight: The acquisition only wins if it delivers capabilities beyond claims automation (e.g., new product lines, proprietary data assets) that generate incremental revenue. On pure cost savings, the build option dominates.
Question 3Judgement & Insights
Prompt: "Please review Exhibits 1 through 3. Based on what you see, which distribution channel strategy should ShieldInsure prioritize alongside its digital transformation?"
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
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Direct the candidate to all three exhibits. Allow 90 seconds for review before discussion.
Share if candidate asks about channel economics:
- Agent commissions average 12% of premium in Year 1, dropping to 4% on renewals
- Digital acquisition spend is primarily Google/Meta ads at $38 average CPC for insurance keywords
- Insurtech platforms charge 15-20% revenue share on policies originated through their marketplace
- ShieldInsure's agent attrition rate is 18% annually; replacing an experienced agent takes 9 months
Exhibit 1Combined Ratio Trend (2020-2024)
| Year | ShieldInsure | Peer Average | Leading Insurtech |
|---|---|---|---|
| 2020 | 94% | 96% | 108% |
| 2021 | 95% | 95% | 104% |
| 2022 | 97% | 94% | 99% |
| 2023 | 100% | 93% | 95% |
| 2024 | 102% | 92% | 91% |
Source: ShieldInsure case file
Exhibit 2Customer Acquisition Channel Comparison (2024)
| Metric | Agent Channel | Direct Digital | Insurtech Platform |
|---|---|---|---|
| Customer Acquisition Cost | $480 | $160 | $95 |
| Average Annual Premium | $1,850 | $1,120 | $940 |
| Customer Retention Rate | 89% | 74% | 64% |
| Customer Lifetime Value | $9,600 | $2,880 | $1,425 |
| CLV / CAC Ratio | 20.0x | 18.0x | 15.0x |
| Share of New Policies (2024) | 38% | 35% | 27% |
| Share of New Policies (2020) | 72% | 22% | 6% |
Source: ShieldInsure case file
Exhibit 3Claims Processing Comparison (2024)
| Metric | ShieldInsure | Peer Average | Insurtech Benchmark |
|---|---|---|---|
| Average Claim Cycle Time (days) | 18 | 12 | 3 |
| Cost per Claim | $560 | $340 | $85 |
| Auto-Adjudication Rate | 12% | 38% | 78% |
| Customer Satisfaction (claims) | 3.1 / 5.0 | 3.7 / 5.0 | 4.4 / 5.0 |
| Fraud Detection Rate | 4.2% | 6.8% | 11.5% |
| Claims Staff per $100M Premium | 42 | 28 | 8 |
Source: ShieldInsure case file
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The exhibits reveal that ShieldInsure's competitive disadvantage is operational efficiency, not distribution. The agent channel delivers superior economics when measured correctly (CLV/CAC of 20x vs. 15x for insurtech). The right strategy is to digitally arm the agent network while building a parallel digital-direct channel:
- Protect and enable agents -- Invest in agent-facing tools (instant quoting, digital proposals, self-service portals) to maintain the 89% retention advantage
- Build digital-direct for acquisition -- Target the price-sensitive segment where agents are uneconomical, using digital marketing and instant-bind capabilities
- Fix claims processing urgently -- Exhibit 3 shows ShieldInsure's 18-day cycle time and $560/claim cost are 6x and 6.6x worse than insurtechs respectively; this is the primary driver of combined ratio deterioration
Additional observations strong candidates surface:
- Exhibit 1 shows the lines crossing between 2021-2022 -- ShieldInsure went from outperforming peers to underperforming in just one year, suggesting a tipping point rather than gradual decline
- Exhibit 2 shows agent share of new policies dropped from 72% to 38% in four years -- the channel is still viable but shrinking rapidly; inaction accelerates the decline
- Exhibit 3's fraud detection gap (4.2% vs. 11.5%) implies ShieldInsure is paying out fraudulent claims that insurtechs catch, contributing to the 5-point loss ratio gap
- The insurtech's $85 cost per claim vs. ShieldInsure's $560 is a 6.6x gap -- but the peer average ($340) suggests even moderate digitization halves costs, and full automation is not required to reach profitability
What the interviewer is looking forShow guidanceHide guidance
Good: Candidate notes that digital and insurtech channels have lower acquisition costs and concludes ShieldInsure should shift budget toward digital. References the claims processing gap in Exhibit 3.
Strong: Candidate notices the lifetime value data in Exhibit 2 and recognizes that agents generate $9,600 in CLV despite the $480 CAC -- a 20x return. Compares this to digital (18x) and insurtech (15x). Argues for a hybrid strategy rather than wholesale channel shift. References the combined ratio convergence in Exhibit 1 to build urgency.
Excellent: Candidate identifies the exhibit trap explicitly: "The agent channel looks expensive on a per-acquisition basis, but it delivers the highest CLV and the best CLV-to-CAC ratio. Cutting agent investment to fund digital would destroy the most profitable customer relationships." Builds a three-layer insight cascade:
- Level 1 (Surface): Insurtechs acquire customers cheaply, ShieldInsure's agent channel is expensive
- Level 2 (Implication): But agent-acquired customers retain at 89% vs. 64% for insurtech channels, generating 3.7x more lifetime value -- the cost advantage reverses when measured over the customer lifecycle
- Level 3 (Actionable): ShieldInsure should digitally enable its agent network (CRM tools, instant quoting, digital servicing) rather than replace it, while building a direct digital channel for price-sensitive segments that agents do not serve profitably
Also notes from Exhibit 1 that insurtechs improved from 108% to 91% combined ratio in four years -- a pace ShieldInsure must match or exceed, creating urgency around execution speed.
Question 4Synthesis
Prompt: "The CEO has 10 minutes before a board meeting. What is your recommendation?"
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
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"ShieldInsure should pursue a build-first strategy with a targeted technology partnership, not an acquisition.
The core problem is operational, not strategic. Your combined ratio has worsened by 7 points in four years, driven primarily by claims processing costs that are 6x higher than insurtech benchmarks. This is fixable through technology investment without a full acquisition.
The financial case is compelling. Digital claims transformation alone saves $84 million annually -- a 6-point improvement in your combined ratio, returning you to underwriting profitability at 96%. The $180 million build investment pays back in just over three years. An acquisition at $250-400 million costs nearly twice as much with significant integration risk.
Sequence in three phases:
- Months 1-6: Partner with a claims automation vendor to deploy AI triage on auto and home claims. Target 35% auto-adjudication by month 6 for ~$25 million in annualized savings. This shows the board near-term results.
- Months 6-18: Build the core digital platform -- instant quoting, digital servicing, agent CRM tools. This protects your agent channel, which generates 20x CLV-to-CAC returns.
- Months 18-36: Launch direct digital channel for price-sensitive segments and deploy usage-based pricing for auto.
One critical caution: do not cut agent investment to fund digital. Your exhibits show agents deliver $9,600 in lifetime value per customer at 89% retention. The goal is to make agents digitally competitive, not to replace them.
This path returns ShieldInsure to a 96% combined ratio within three years while preserving your most valuable distribution asset."
Key risks to flag:
- Execution risk: Building digital capabilities requires hiring 150-200 technology staff in a competitive talent market; ShieldInsure's current 8% tech headcount suggests limited internal capability
- Agent relationship risk: Agents may perceive a direct digital channel as competitive and shift business to rival carriers; communication and incentive alignment are critical
- Timeline risk: The 38-month payback on build exceeds the 18-month board mandate, making the Phase 1 partnership essential to demonstrate early progress
Contributed by CaseDrill practice community
What the interviewer is looking forShow guidanceHide guidance
A strong synthesis addresses: the strategic choice (build, buy, or partner), sequencing, the agent channel question, and the financial case -- all in under two minutes.
Good: Candidate picks one option and explains the financial rationale. Mentions the combined ratio target.
Strong: Candidate recommends a hybrid approach (build + partner) with clear phasing. References specific numbers from the analysis. Addresses the agent channel explicitly.
Excellent: Candidate frames the recommendation around the single root cause (operational cost inefficiency in claims), connects it to the exhibit insights (agent CLV trap, combined ratio crossover), and provides a sequenced plan with measurable milestones tied to the 18-month board mandate. Acknowledges risks and mitigants: execution risk on build timeline, talent scarcity for digital hires, potential agent backlash if digital channel is perceived as competitive.