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Most investors are reeling from the recent slump in the Chinese economy, and Discovery Health is not largely unaffected by the ructions of Chinese stocks.
But the healthcare company’s co-founder, Barry Swartzberg, gushes about the company’s growth prospects in China.
“We’re not worried about how the economy is doing, because we’re just starting out and I think the potential is tremendous. The market is just starting out there from a health insurance perspective.
“The only people who were covered were mainly foreigners working in multinational organisations, but that market is stagnant and of a certain size.
Today, most Chinese organisations are not using foreign nationals any more; they’re looking within China for staff to do the work.
“But the growth market is local Chinese managers wanting to buy health insurance. As they move up to being middle class, they will certainly buy more health insurance cover,” said Swartzberg.
Since acquiring a 25% share in China’s Ping An Health Insurance in 2009, becoming the first venture to offer private health insurance products to the population of 1.3 billion, Swartzberg has never doubted the investment decision.
Prior to Discovery’s entry, the Chinese preferred public hospitals for health services. The government covers 50% of their bill, another 25% is copayments or limits, while another 25% is not covered.
Discovery decided to explore covering the 50% not covered by the state, and this is paying off.
By 2013, the venture was signing up more than 300 Chinese people a day. Today, nearly 1 000 people a day are buying health insurance products.
With the Chinese government in talks about a possible tax incentive for people who buy health insurance, Swartzberg said, only partly in jest, that they were targeting 10 000 people a day.
From a revenue perspective, Discovery has done “exceptionally well”.
“I’m very impressed. By our standards here, I think we’ve got a very good management team there and they’re on the same level, but they manage bigger volumes and, for a large organisation, they move exceedingly quickly.
“For most large companies, to move in a different direction is difficult, whereas Ping An moves exceptionally quickly.
“While we’re not making profits yet, the losses are not significant. I find the Chinese tight on expense management. Salaries are moderate and they have quality staff at reasonable pricing,” said Swartzberg.
Discovery’s Vitality Rewards approach, similar to that offered in South Africa and the UK, did not take off as planned and the company has had to change its approach by rewarding clients using “wearable” devices that measure their activity.
“We took too much of our Western framing when we initially went to develop Vitality in China.
We had gyms, movies, retail outlets and other Vitality rewards, and it didn’t work as well as we would’ve liked.
We are changing now and are using wearable [device] rewards. It’s far more exciting for the Chinese market. It’s a long-term business.
“We’re not there to make a quick buck. That’s what I like about it.
