iSelect director's links with insurer uncovered

New details have emerged about the close links between troubled health insurance comparison site, iSelect, and Australia's newest health insurer, health.com.au.

New details have emerged about the close links between troubled health insurance comparison site, iSelect, and Australia's newest health insurer, health.com.au.

ISelect non-executive director Leslie Webb has owned up to 46 per cent of health.com.au's parent company, Australian Securities and Investments Commission documents show, and now owns almost 7 per cent. Other investors in health.com.au's parent company, NIA, include ballet star turned stockbroker Li Cunxin, author of Mao's Last Dancer, recently departed Brisbane Lions chairman Angus Johnson, and Spotlight founder Morry Fraid.

Lawyer Robert Richter, QC, magistrate Charlie Rozencwajg, former iSelect employee Giles Hunt and a group of stockbrokers from Evans & Partners are also investors.

NIA spokesman Frank Peppard, who also owns shares in the company, said the shareholdings were "broadly accurate". He confirmed NIA was "preparing a number of options to finance health.com.au's future growth, including a potential IPO [initial public offering] and/or other sources of funding".

NIA has a $75 million debt facility with iSelect, allowing the insurer to defer paying fees for sales through iSelect until at least July 2014.

ISelect, which listed on the sharemarket this year, has been criticised for failing to disclose family links between health.com.au founder Andy Sheats and Matt McCann, its recently departed CEO, as well as not disclosing Mr Webb had a shareholding in NIA.

The extent of Mr Webb's stake - 46 per cent in May 2011, falling to 22 per cent in November that year - can now be revealed after ASIC searches by Fairfax Media.

Mr Webb was the only iSelect director allowed to sell shares held in escrow into the company's listing.

BusinessDay asked iSelect why Mr Webb's stake was not revealed in its prospectus and what steps were taken during negotiations of the debt facility to ensure that Mr Webb's potential conflict of interest was dealt with. The company was unable to respond on Tuesday.

Health.com.au launched last year with an aggressive offer and aspirations of becoming a top 10 insurer.

NIA has raised $53 million since June 2011, and will need to raise more over the next few years to pay down its debt facility with iSelect. In the year to June, it booked "customer acquisition costs" of $13.8 million, an average of $836 per customer.

ISelect's prospectus predicted the debt facility would reach $19.86 million by the end of calendar 2013.

NIA reported a $17.2 million loss in 2013, wider than the previous period, and said it had a surge in policyholders to 16,502.

Claims at private health insurers tend to rise in the second year, as waiting periods on policies expire.

Signing off on the NIA accounts on September 19, KPMG partner Paul McDonald drew attention to "the existence of a material uncertainty that may cast significant doubt about the group's ability to continue as a going concern".

NIA board members include Financial Services Council head John Brogden, M2 Telecommunications co-founder Vaughan Bowen, and Andrew Hunter, managing director of government export agency EFIC.

iSelect acting CEO and chief financial officer David Chalmers said last week health.com.au was "nowhere near our largest provider [private health insurer]."

Founder and chairman Damien Waller said iSelect's algorithm "doesn't favour any particular product provider".

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