Schemes under pressure

01 October 2009 Peter Jordaan, Fedhealth

Significant challenges are facing medical schemes in the current market, making effective branding and marketing, as well as the role of the broker, more important than ever.

Soaring healthcare costs, the current credit crunch, a steady attrition of civil service members to the new Government Employees Medical Scheme (GEMS) and the drive to implement a National Health Insurance are serious challenges for many medical schemes.

From a medical scheme perspective, these challenges are resulting in a number of schemes starting to explore mergers and amalgamations to stay afloat. Even though this trend is largely confined to the smaller schemes, some of the bigger schemes are also taking strain having to contend with medical inflation that is well above the national average.

Inevitably, this impacts on affordability and the biggest challenge facing medical schemes is to continue to provide adequate benefits at monthly contributions acceptable to members.

Key factor: claims

The key factor is the profile of each medical scheme. A small scheme with a large number of high claiming and ageing members is clearly at risk. This risk is compounded where the scheme also has a large number of government members. These members traditionally have a low claiming profile and if they join the burgeoning GEMS in significant numbers, this could tip the balance to the high claiming and ageing members which can place increased financial pressure on a scheme.

Aggravating this scenario is the unusually high claiming rates experienced in 2009 throughout the medical aid industry. There is no clear reason for this phenomenon, although some analysts believe one of the reasons could be that some members are opting for surgery for non-urgent ailments prompted by the fear of being retrenched or the uncertainty surrounding the move towards National Health Insurance.

Expanding market reach

For the bigger and more established medical schemes, the challenge is to expand their reach by focusing even more strongly on actively marketing their products and benefits. Schemes need to work much harder to get their brands out to the consumer and to make them appealing to the correct target market. It's all about sending a positive message to members and potential members by demonstrating financial stability, showing high solvency ratios backed by sound investment policies and, most importantly, providing meaningful benefits at competitive contribution rates.

Legislation is also forcing less and less product differentiation onto schemes, which means that brand appeal will become more and more important as the difference between products and pricing becomes smaller.

Broker's role

Brokers are an integral part of the acquisition process for any scheme and it is important that a scheme partners with brokers in all their marketing efforts. The main objective of any marketing campaign should be to drive business to the broker with an already positive perception of a specific brand and assisting the broker as far as possible with the conversion process.

Research has shown that in most cases consumers will arrive at the broker with a scheme already in mind. This "perception", whether it is through word-of-mouth or marketing efforts, is important as it makes the broker's work much easier - convincing a client that medical aid is important and that they cannot do without it has already been done by the scheme. This then leaves the broker to ensure that he provides the prospective member with "best advice" as to which scheme to join.

Quick Polls


How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?


Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now