One of the frustrating realities of most insurance policies is it is basically impossible to get away from an accident without losing a nice chunk of cash. Sure, the policy helps prevent the costs from becoming debilitating, but most people will pay, at the minimum, a few hundred bucks in a health, home or automobile accident.
This concept is called insurance excess. If the cost of a car repair is US$3,000, the insurance company will cover US$2,500, but the driver will have to fork over US$500.
Enter Bandboo, a Singaporean startup that wants to solve this problem by creating “pools” whereby people pay into a community and, should something happen, Bandboo has structured its services to cover insurance excesses up to S$4,000 (US$2,900).
The price ranges from S$4.50 (US$3.40) to S$9 (US$6.70) per day, but what is interesting is while these premiums contribute to fulfilling excess payments, the leftover amount is returned to the customer at the end of the month.
While the company doesn’t turn away B2C interest, it is best to imagine Bandboo as a B2B business model.
“So if you and five friends want to come together and insure yourselves against car accidents, you can do that. But how much premiums do you want to pay? So if you want to pay normalised premiums that is normalised to the incumbents, you will need to form a large pool,” said Ashley Kee, the Co-founder and CEO of Bandboo.
Kee said they have done the math and for the system to work, it requires a minimum of 400 people to come on board in a given pool.
The model brings up one obvious potential client — private-hire drivers for companies like Uber and Grab. While the companies do offer insurance, it’s often an ‘off-the-shelf’ plan and Kee said they are still liable to pay a decent amount of money should they get in an accident.
There are similar models on the market, but they don’t get the excess number down to zero. According to Kee, Lion City Rental (who supplies Uber drivers with their cars in Singapore), charges S$9 (US$6.70) per day to reduce excess down to S$500 (US$371).
Bandboo wants to cover the total costs and offer the cash back component highlighted above.
Kee said the idea isn’t to disrupt the Grab and Ubers of the world, but work with them and hopefully become an insurance provider for the fleets. He also views Bandboo as a company that can be complimentary to insurance programmes.
As a tech company that allows users to come on board and cross-insure one another, Bandboo does not need to be regulated by MAS.
The team has also put a lot of energy into transparency — building an open ledger so people can see payout records and understand that their money is actually being put to good use.
“Having open ledgers ensures that our premium and payout records are highly transparent. They also allow us to give our members cash back on the unused portion of the premium pool with an extremely high level of accuracy and trust. This assures our members that they have been treated fairly and with honesty,” said Kee.
Looking into other verticals
Finally, while the current product is tailored towards the automobile industry, Kee didn’t leave out other markets. One of the more interesting ideas brought up in the conversation was outdoor sporting events (think marathons and triathlons).
Kee brought up the example of Singapore’s cycling groups — a fairly active and popular community in the city. They tend to be informal, gathering via Facebook or WhatsApp, but often are extremely intense and move very fast. When these cycling groups get into accidents it is often a ‘hospital worthy’ incident and does require insurance.
Kee said they have a hard time getting insured because they are small groups, 6-10 people at most, and insurance companies find it difficult to calculate the risk of insuring this community.
Bandboo wants to come in and provide tailored insurance plans to these types of groups and Kee sees a future in helping running, swimming and other outdoor activity event organisers provide personalised insurance to their participants.
Bandboo was founded in March 2016 and began its startup journey offering unemployment insurance with a similar group pool model.
While ‘pivot’ is probably too strong a word, the company is making a definitive shift towards the car insurance play and, in the future, outdoor sporting events.
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