Case Interview Question #00472: Chase Bank is the consumer and commercial banking subsidiary of J.P. Morgan Chase & Co. (NYSE: JPM). The bank was known as Chase Manhattan Bank until it merged with J.P. Morgan & Co. in year 2000. With more than 5,100 branches and 16,100 ATMs nationwide, J.P. Morgan Chase is one of the Big Four banks of the United States with Bank of America, Citigroup and Wells Fargo. In 2004, J.P. Morgan Chase acquired Bank One, making Chase the largest credit card issuer in the US.
Recently, the credit card division of Chase is considering launching a new financial product: cross-selling credit card insurance policy to its credit card holders. Credit card insurance usually come in a variety of forms. The four main types are credit life insurance, disability insurance, unemployment insurance, and property insurance. For this case Chase plans to launch unemployment credit insurance only. The insurance product works this way:
- customers who buy the unemployment credit insurance policy would pay 1% of their monthly balance for insurance premium;
- if customers are involuntarily laid-off or downsized, they can file insurance claim and Chase would pay their credit card debt in the month they are laid-off;
- customers’ credit card purchases after the involuntary unemployment would not be covered.
Question #1: Is this credit card insurance product going to be a profitable business for Chase?