Breaking up (is easy to do)

Finally some industry news this week – and what interesting news it is!  After five years Bestmed and Sanlam are going their separate ways.

Bestmed was always a self-administered medical scheme but sold the administration capability to Sanlam in 2008.  The logic of the deal was that Sanlam would get a foot in the healthcare market and Bestmed would get access to Sanlam’s distribution channel.  The scheme did actually manage to achieve significant organic growth where most if its competitors had to rely on amalgamation strategies.  Whether this growth was with quality business is another question – I’m eagerly waiting to see their 2011 financial results.

Regardless – in 2008 the future seemed so bright everybody had to wear shades.

From the FM article it is blindingly obvious that Sanlam is trying to put a positive spin on the breakup.  Trustee chairman JJ Labuschagne is more cagey.  Take from that what you will…

Readers with longer memories may recall that this wasn’t Sanlam’s first foray into health.  The last expedition, in the late 1990’s, was such a disaster that this time around Bestmed got to keep its name because it was felt consumers wouldn’t trust a medical scheme with a name like “Sanmed” or even “Sanlam Health”.

If I was superstitious I may have taken this as proof that the boys from Belville are cursed in health.  More rationally they may just not know what they are doing.

Looking at the history of such insurer/medical scheme tie-ups shows that it is an area fraught with danger.

  • Old Mutual and Oxygen parted ways when the jolly green giant decided that being in healthcare was more trouble than it was worth.
  • Momentum purchased Multimed (then the administrator of Munimed which amalgamated with Global to form KeyHealth) and took on KeyHealth as a client medical scheme.  Last year Keyhealth defected to P.M.S.A (administrators of Profmed).  Pretty much the only lasting thing of value Momentum got from the whole affair was an ugly building next to the highway in Centurion.
  • There were also signs of relationship problems between Liberty Medical Scheme and (Liberty owned) V-Med.

I swear next time someone claims that such tie-ups are a sure recipe for success I am going to smack them.

In conclusion – it seems Sanlam is out cruising the bars again looking for a naive open scheme to hook up with.  For the open schemes considering this some friendly advice:  Consider the history.  Also – use protection.

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