“We’re thinking 2015,” says Health.com.au chief executive Andy Sheats, on when the insurance start-up will publicly-list.
Last night the business took out the start-up category of the Telstra Australian Business Awards, after earlier wining the same slot in Victoria.
And, while 2015 might be a few years off, Australia’s investment banks are already interested. “We’ve spoken to all of them; there’s no one we haven’t met.”
Way back, on the last day in March 2011, when the company was registered with ASIC, thought had already been put towards the float.
“All the simplicity that you need to list, so that you don’t have to backwards engineer it, we started with that.
“The things you might do if you were preparing for an IPO, we’ve already done that.”
It would not be foreign territory for Sheats, who as a consultant with Booz Allen provided due diligence advice to SEEK before its IPO in 2005.
Since securing seed funding in June 2011, as of this month the business has taken in $46 million in revenue.
Even in its first year, takings were still a tidy $19 million. And today there are 18,000 members, and 45,0000 Australians covered by Health.com.au’s policies.
When Sheats quite REA Group (the publisher of Realestate.com.au) where he was general manager of strategy and corporate development until June 2011, it wasn’t to start his own business.
But after he looked at the state of Australia’s health insurance market, tied-up by two companies he says undermine their clients with poor customer service, he saw a industry where his digital expertise provided an opportunity.
So he launched the first new health insurer in Australia since 1977.
“We wanted to kick the industry in the nuts.”
It won its license in December 2011, and secured a partnership with iSelect early the next year.
A start-up for grown ups
Former New South Wales opposition leader John Brogden, now the chief executive of lobby group the Financial Services Council, is an investor, and non-executive director.
Brogden was the boss of health fund Manchester Unity between 2006 and 2008, when the company was taken over by HCF Health Insurance.
Also invested are the Fraid family, the dynasty behind textiles chain Spotlight, whose net-worth Forbes puts at $785 million, as well as M2 Communications co-founder and executive director Vaughan Bowen, and Geoff Brooke, co-founder and managing partner of GBS Venture Partners.
GBS is the largest shareholder, with 16%. The management team owns 11% of the company, and the board holds 28%.
In total there are 75 investors, all of whom hold common shares, which means, according to Sheats, that no one can override the direction of the company.
Health.com.au has raised $34 million in funding so far, and the IPO is the what it hopes will fuel the next stage of its growth.
It’s chipping at a market mostly owned by Medibank and Bupa, and while it will be “a while before we hit bone,” if the company’s growth is anything to go by, the next stage will see it capture more.
It may also disrupt other insurance sectors. Sheats says there at between three and four staff working full-time on researching new growth areas. “All I can say is watch this space.”
But it’s a long way off being a threat to the major players, having less than 1% of the market against Medibank’s 30% and Bupa’s 26.7%.
Ahead in one big area
While its a minnow in terms of market share, on Health.com.au walks all over its bigger rivals in customer service, which is one of its biggest value-adds.
Sentiment tracker serviceRage’s data says the only private health insurer with less negative social media comments made about it is HIF.
Less than half of all comments made about Health.com.au are negative, compared with 74% of those made about Bupa, and 78% of the things said about Medibank.
Sheats said the staff for its Melbourne-based call centre are hired on their ability to be personable.
“We did start out wanted to kick the industry in the nuts, but we also wanted to set a higher standard.
“We really did want to raise the bar.”
All its products are simple. Health has no bricks-and-mortar presence, so they are also cheaper. Sheats said the business is designed so that when something really bad happens, you can call. But all the day-to-day correspondence can be taken care of online.
If you are a customer, you can also use an doctor or dentist.
The average age of Health’s customers is 28. Its marketing strategy, and the simplicity of its products — which aim to take all the fine print out of insurance shopping — is pitched at signing clients who’ve never had a policy before.
“That make a lot more sense than going to a 50-year-old couple.”
Half of the client base is first-time policy-holders, and the other half are customers who have switched, often after having a bad customer service experience with one of the brand’s competitors.
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