Estimate the market size of an online flight insurance business in the US.
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ago in Estimation by (12 points) | 69 views

3 Answers

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Clarity 

When you say USA are you referring to all flights within US ( Domestic) and not international flights moving and out of the US

Online flight insurance for passengers - cargo flights aren't included in this 

I'm unaware if it's mandatory on demoestic flights - assuming it's optional

Does this include business travel - Yes

There are different packages available - assuming the average insurance to be 5$ to upto 50$ since the insured amount will vary from package to package

When you say online flight insurance business you mean the revenue generated by the industry 

estimation flow

Population ~280 Million 

industry = Number of flights x penetration overall x avg insurance revenue per trip

we can deriby the by : Split by % in terms of who can afford to fly/how often/what's the insurance penetration/avg insurance price

10% do not fly at all, these are people who are limited to local travel/travel by ground, 

10% fly twice a year ( since you have to come back as well after flying in :) ) these are people who must fly on emergency but don't fly often, assume 20% insurance penetration with an avg insurance ticket size of 6$

50% fly 10 times a year These are the lower/middle middle class, most of the travel is lesisure but the odd business trip might be there, assume 20% insurance penetration with an avg insurance ticket size of of 7.5$

20% fly 20 times a year These are upper middle class who have to travel often for business as well,assume 30% insurance penetration with an avg insurance ticket size of of 10$

10% fly 40 times a year These are the upper class folks who can afford to fly more often for leisure and also need to fly often for business, business travel is often paid for and insured so the average insurance size is at 15$

Which rougly works out to 39.1 Billion dollars  

ago by (62 points)
0 votes

Clarity 

When you say USA are you referring to all flights within US ( Domestic) and not international flights moving and out of the US

Online flight insurance for passengers - cargo flights aren't included in this 

I'm unaware if it's mandatory on demoestic flights - assuming it's optional

Does this include business travel - Yes

There are different packages available - assuming the average insurance to be 5$ to upto 50$ since the insured amount will vary from package to package

When you say online flight insurance business you mean the revenue generated by the industry 

Population of US

~280 Million 

Split by % in terms of who can afford to fly how often

10% do not fly at all, these are people who are limited to local travel/travel by ground, 

10% fly twice a year ( since you have to come back as well after flying in :) ) these are people who must fly on emergency but don't fly often, assume 20% insurance penetration with an avg insurance ticket size of 6$

50% fly 10 times a year These are the lower/middle middle class, most of the travel is lesisure but the odd business trip might be there, assume 20% insurance penetration with an avg insurance ticket size of of 7.5$

20% fly 20 times a year These are upper middle class who have to travel often for business as well,assume 30% insurance penetration with an avg insurance ticket size of of 10$

10% fly 40 times a year These are the upper class folks who can afford to fly more often for leisure and also need to fly often for business, business travel is often paid for and insured so the average insurance size is at 15$

Which rougly works out to 39.1 Billion dollars 

ago by
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Before answering this question, we need to know what does Online Flight Insurance mean?

What Online Flight INsurance means to me (I will clarify with the interviewer): There are domestic and international flights going to and from the US. Sometimes during travel, you might lose bags or property might get damaged. Hence, the insurance can help you get proper refund in these cases. Also, for international trips, this includes medical claims and hospitalization as well (Travel insurance). 

Based on what interviewer replies, I will go ahead with more information.

Filter 1: I am an Indian citized so have less idea about the US. However, I know there are 50 states in the US. I am going to assume each state has 4 major domestic and  2 international airports in each state. 200 domestic and 100 international airports. 

 Filter 2: There are 4 terminals per airport for flights going anywhere from the US coming to the US. Every flight interval is 30 minutes. Hence, we can say per day 4*(60/30)* 20 flights either come or go. Assuming 4 hours flights do no travel due to operational reasons. 

Filter 3: Domestic flights are generally carry 30 rows (Boeing 737) so maximum capacity of 180 seats. International flights (Boeing 777) have 300 capacity. 80% of the flight capaicty will be filled on average.

Filter 5: Travel insurance will generally be booked for return trips so I will divide the total number by 2.

People available for travel insurance per day= [(200*4*2*20*180 + 300*4*2*20*300)*0.8]/2 ~ 8 million

Travel insurance cost = $20 

Market per year = 8 million * 20 *365 = $60 Billion (Total addressable market)

 

ago by (42 points)
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