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SUNDAY TIMES Discovery's strategy to expand into China is paying off as the country's 1.4 billion people grow private health insurance into an industry worth nearly R2 trillion. Growth in SA's private health care sector is increasingly difficult to achieve; the number of insured lives has been stagnant at about 8 million since 2014. This has sparked diversification into other business lines and or expansion into foreign markets. Discovery entered the health insurance market in China in 2010 when it acquired a 25% stake in a subsidiary of one of China's biggest insurance companies, Ping An Health PAH. Discovery reports that for the six months ending in December 2018, PAH's new business premiums grew 117% to Y2.1bn R4.3bn. On Thursday, in his interim results presentation, Discovery CEO Adrian Gore said: "If you look at the insurance markets in China, they have grown incredibly, like life insurance, motor insurance. Health insurance has not been a big market until now." Massive middle class He said China's middle class numbered between 300 million and 400 million people and the idea is to scale the PAH business quickly so it becomes a leading health insurance provider. China has a national health insurance system but it usually covers only half of what patients must pay. Barry Swartzberg, CEO of Discovery's Vitality Group, said every city in China had its own social health insurance plan. "Some cities cover more, some cover less," Swartzberg said. "But on average if a person is hospitalised they will only be covered for 50% of the bill by the social health insurance plan. So the other 50% they've got to pay out of their pocket." The result has been a burgeoning private health insurance industry, which research by the Boston Consulting Group projects will be worth about Y1-trillion in 2020 and is expected to grow to Y2.5 trillion in 2025, from Y241bn in 2015. Swartzberg said private health insurance in China comes in three types: high-, middle- and low-end. At the high end – a small section of the market an annual premium of Y10,000 will buy clients access to any hospital and to VIP wards when they travel overseas. The middle option comes at a cost of Y2,000 a year and doesn't cover private facilities. Popular option The cheapest and most popular option costs Y600. Those who choose it pay an excess fee and their insurance company makes up the difference of their 50% share of medical bills. "It is selling exceptionally well because it's a fairly low premium but the cover is good for catastrophe ... So that's where the market is and it's growing," Swartzberg said. Warwick Bam, head of research at Avior Capital Markets, said PAH's expansion has accelerated thanks to its app and he expects it to grow at rates above 30% annually for the next several years. Bam said the Chinese market is potentially 20 times larger than SA's.
Created at 2019/03/05 11:10 AM by Mediclinic
Last modified at 2019/03/05 11:10 AM by Mediclinic