Dis-Chem’s acquisition of medical insurance company Kaelo will make it a bigger healthcare player and disrupt the medical aid industry.
In November 2021, Dis-Chem acquired a 25% stake in medical insurance company Kaelo Holdings.
Dis-Chem paid Kaelo R160 million as part of the deal, which could be increased to a total consideration of R195 million, depending on Kaelo’s 2022 financial year performance.
Kaelo’s core offering is gap and primary healthcare insurance products.
The acquisition enhances Dis-Chem’s primary healthcare status by expanding its operations into the medical insurance space.
Dis-Chem’s large primary care footprint and synergies with other investments allow it to design a healthcare insurance product that better suits the market.
The partnership will also significantly impact the input costs to deliver an affordable medical insurance solution.
The market for affordable healthcare insurance products in South Africa is huge.
In October 2021, Dis-Chem identified its target market as 12.4 million South Africans that are employed but medically uninsured.
If Dis-Chem successfully penetrates this market, it could have a big impact on its revenue.
Kaelo CEO John Jutzen said it is a market that has been neglected, to a large extent, by the private healthcare system.
He mentioned that 72% of South Africans still rely on the public sector for healthcare.
Although private healthcare is widely available, it is inaccessible to most South Africans due to the price.
The Dis-Chem and Kaelo partnership led to the launch of Dis-Chem Health with three medical insurance plans:
- Core – R431 per month.
- Plus – R591 per month.
- Accident Cover – R185 per month.
Two additional products combine Accident Cover with either of the Core or Plus plans.
Jutzen explained that health insurance is not as comprehensive as medical aid, and the plans have a more defined set of benefits.
However, the plans are constructed based on consumption data aimed at the key elements of healthcare – from day-to-day healthcare to chronic disease cover.
The partnership allows consumers access to healthcare through Dis-Chem clinics, which are part of the extensive Primecure network.
The vast network offers acute and chronic condition diagnosis, monthly chronic medication access, day-to-day medication, and private hospital cover.
Dis-Chem may have spotted a golden opportunity in the health insurance space by partnering with Kaelo.
If the Dis-Chem Health collaboration is successful, it could exploit a market that has not yet been penetrated.
It has the potential to gain market share from large medical aid players whose prices are out of reach for lower-income clients.
Dis-Chem said the uptake in the Dis-Chem Health segment had exceeded its expectations, which may signal that the future is bright for the company.