A legal battle between health insurance giant Bupa Australia and health insurance comparison site iSelect has ended with iSelect agreeing to temper its advertising claims and make a donation to Bupa's medical research fund.
Both companies say they are pleased with the agreement, which comes ahead of an expected sharemarket listing by iSelect this year.
The case was ignited by a letter from iSelect to Bupa's customers at the end of 2011. Bupa then launched legal action against iSelect, seeking a Federal Court order stopping iSelect from making certain claims about no waiting period for people who switched their health insurance, arguing that Australian law mandates that nobody has to re-serve waiting periods when switching to an equivalent or lower level of cover.
Bupa also raised concerns about iSelect's claims that on average consumers could save about $600 a year by switching their policy and sought compensation for commercial damage.
In response, iSelect said it would "vigorously defend" the deceptive and misleading allegations made against it and its directors, Damien Waller and Matthew McCann. It later launched a cross claim against Bupa and its managing director, Richard Bowden. These cross claims were dismissed by the consent.
The companies last last week through court-ordered mediation. This followed two attempts at mediation, but eventually the companies settled privately.
Under the agreement, iSelect has undertaken for three years to refrain from stating that it compares "most" or a "wide" range of health insurance products and funds unless this is the case.
It also will refrain from overstating savings customers might receive for switching policies or stating that customers will not have to re-serve waiting periods on new policies.
In addition, iSelect will make a donation to the Bupa Foundation, Bupa's medical research fund. The amount has not been disclosed.
Emma Zipper, general counsel and company secretary of Bupa Australia, told BusinessDay that Bupa was "delighted" and "vindicated" by the orders.
"This list of representations here are all the representations that we were making claims about: the savings, the comparisons, the waiting periods, the whole lot," Ms Zipper said.
The head of corporate affairs for iSelect, Matthew Cuming, said that iSelect's undertakings to the court would have "no impact on iSelect's current business operations or any of its current or proposed future advertising".
Mr Cuming noted that "Bupa also had given undertakings to iSelect in relation to conduct that was the subject of iSelect's claims against Bupa in the proceedings."
"The board of iSelect is pleased with the outcome, and looks forward to one day welcoming Bupa onto iSelect's panel of health insurance providers," Mr Cuming said.
But Bupa Australia's Ms Zipper said its private undertaking relating to a press release issued at the start of the proceedings was "not the main game".
iSelect, Australia's largest health insurance comparison site, is expected to list on the sharemarket this year.
According to its website, it sells products from 12 health funds, including the listed health insurer NIB. Bupa products are not sold through iSelect.
iSelect declined to answer whether it had recently sought to raise money in Asia, in addition to the $29 million raised with investors last year. The raising was priced at $18.50 a share, a multiple of almost 20 times earnings.
Its 2012 financial report shows that iSelect reported a $12.9 million profit, up from $10.6 million the previous year.