The phrase "running two horses in the race" could not be more apt when describing how Rand Merchant Bank (RMB) — and later FirstRand — backed both Momentum and Discovery.
After Adrian Gore left Liberty to form innovative medical aid scheme administrator Discovery in 1992, the merchant bank agreed to back him, says RMB co-founder Laurie Dippenaar. To that end, it initially planned to revitalise a dormant life company — but a matter of weeks later it acquired control of Momentum.
"Adrian was initially disappointed that we weren’t giving him undivided attention and launching with a new brand," says Dippenaar. "But it made business sense to launch the business as Momentum Health."
As a compromise, the product was branded "Momentum Health, powered by Discovery".
Access to the Momentum distribution infrastructure was an important benefit for Discovery, says Dippenaar. It meant medical aid, for the first time, could be sold aggressively as a retail product.
Momentum Metropolitan CEO Hillie Meyer admits there was some resentment that Gore built his business on the back of Momentum’s broker network, only to turn around and compete as a separate business in risk products and, later, even in Momentum’s linked investment product heartland.
But in quiet moments Gore will admit he is grateful for the kickstart his business received from Momentum. "We respect [Momentum] as a strong and well-managed competitor," he tells the FM.
We respect [Momentum] as a strong and well-managed competitor
— Adrian Gore
Discovery was unbundled from FirstRand in 2007 and Momentum (now Momentum Metropolitan Holdings, or MMH) in 2010. About a quarter of the shares in each is still held by Rand Merchant Investment Holdings.
The circle has turned, and Discovery and Momentum are the only life offices in SA that still have a significant presence in the health insurance sector. Old Mutual’s Oxygen and Sanlam Health were both costly mistakes, losing billions of rands each, and Liberty’s Medical Lifestyle hybrid product was banned by the regulator.
The scale, however, is quite different. Discovery’s share of the open medical scheme market is well over 50%, where MMH holds just 7% — though MMH has the larger share in the restricted (in-house) schemes of 18%. MMH’s largest presence in the health sector is through its administration of the Government Employees Medical Scheme (Gems), which it inherited from Metropolitan. But while the head count runs to millions, the margins are tiny.
MMH and Discovery compete most directly in their wellness programmes. Discovery is built on what it calls the Vitality chassis. The success of all the Discovery units depends on the effectiveness of the shared value benefits from the Vitality programme. With its vast medical aid database, Discovery has unparalleled access to clients’ attitudes to health, and it can reward good behaviour. The same philosophy has been applied to driving and banking behaviour.
Very few Discovery medical aid members opt out of the Vitality programme (R290 a month for a single member), though few use it to full advantage.
MMH, in contrast, doesn’t have the same range of services to offer. It has only recently achieved scale in short-term insurance and it has no bank. And while many of Momentum’s clients are prepared to pay the R268 a month fee to stay on its Multiply wellness and rewards product, says Meyer, it is not appropriate for the entire client base. It is higher than the monthly premium paid into many Metropolitan funeral policies, for example.
"But we need to offer it to be competitive in the high net worth market when it comes to our insurance and medical aid businesses," he says.
Meyer believes Multiply is simpler and more transparent than Vitality. There are no additional fees to activate further health, safety and finance components (Vitality’s "Drive" and "Bank" products are separate). Multiply is also more realistic, he says, as points-scoring activities are easily incorporated into daily life. It is hard to earn Vitality exercise points unless you follow Gore’s notoriously Spartan lifestyle and work-out programme. Momentum allows clients of its short-term insurance and life businesses to earn points for health benefits. On Vitality, these accrue only to members of Discovery Health or a closed scheme it administers.
Not all Multiply benefits are very helpful. It still offers a 40% discount on local and international flights on SAA and Mango, for example. On that count, there’s probably more benefit from Vitality, which offers up to 35% off local and international British Airways flights, and off Emirates and Qantas tickets.
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