SINGAPORE: Amid concerns about job security, a local peer-to-peer (P2P) start-up has launched an unemployment insurance product – a first in Singapore.
But unlike conventional insurers, Bandboo focuses on creating “digital communities that allow users to cross-insure one another” against the risk of retrenchment, said co-founder and CEO Ashley Kee. “What makes us different from an insurance company is that we are not underwriting the risk.”
The start-up, founded by Mr Kee and his three partners, introduced its first two insurance products in May with the aim of disrupting the industry. One of them is a P2P unemployment insurance that helps workers “alleviate the shock of a sudden retrenchment”. The other is a retrenchment benefits scheme targeted at businesses.
While income protection and unemployment insurance are relatively rare in Asia, they are “mature products” in developed countries such as Canada, said Mr Kee. With the economic uncertainty putting a squeeze on the local job market, the entrepreneurs saw an opportunity to plug a gap in the market.
For its unemployment insurance, Bandboo’s primary target group is young adults below 40 years old who have heavy commitments, such as mortgages and young children. This group is also often identified in surveys as the ones who have done the least financial planning, said Mr Kee.
“This product really has to do with the macro economic factors we have seen over the past few years... It will hopefully give someone time to get back on his feet, pay bills as he looks for a new job and not have to accept the first one that comes his way, which may not be suitable.”
Bandboo’s unemployment insurance, which lasts for a year, requires consumers to pay a membership fee of S$9.99 and a premium of S$35 each month. Members who are retrenched will receive a payout equivalent to three months’ worth of salary and spread over five months. The total payout is capped at S$18,000.
However, there are conditions which include a no-claim period of six months, members being employed for at least 250 days before the layoff and the retrenchment being reported to the Ministry of Manpower (MOM).
All payouts will be drawn from the communal pot of premiums. At the end of the membership, members who have not made any claims will receive a refund of the remaining funds in their accounts.
"For example, if we collected S$10 million in premiums and paid out S$2 million in claims, 80 per cent of the funds are not utilised. As such, they will be rebated back to the users at the end of the membership term," Mr Kee explained.
These transactions, such as membership fees, premiums and payouts, will be recorded and made visible to all members, thanks to the use of blockchain technology. Bandboo claims to be the first insurance platform that is doing so.
“Blockchain essentially logs all the transactions and creates a ledger system that offers full transparency to our users,” explained co-founder and CTO Ng Zhong Qin. “No one can go in to change it, not even us.”
SIGN-UP RATE RELATIVELY SLOW BUT STILL OPTIMISTIC: FOUNDERS
But even as job security remains a cause for worry for some Singaporeans, the sign-up rate for Bandboo’s unemployment insurance has been “relatively slow”. The founders admitted that educating the public about its P2P insurance product “has been more of a challenge than expected”.
Among consumers that Channel NewsAsia spoke to, most indicated interest in the insurance but they had questions about the P2P model and how it worked. Many also raised questions about the start-up’s ability to sustain its payouts should a large number of members get retrenched.
On that, Mr Kee said the current premiums will be able to “weather 2.5 to three times of the current retrenchment rate” but in the event of a significant rise in redundancy figures, Bandboo will make adjustments accordingly.
“A scenario where retrenchment rates move up to 2 per cent will likely trigger a call for a higher premium contribution. If that happens, the premiums that we charge now will obviously be unsustainable.”
The start-up has also been crunching various employment data since 1997 to ensure a computation of “balanced and diversified portfolio of users who come from various industries and positions” in its P2P community. For example, consumers from a hard-hit industry may be put on the waiting list once a quota is reached to mitigate risks.
For now, the unemployment insurance platform will only go live after the minimum community size of 1,000 members is reached – a target that Bandboo is confident of achieving next month. When that happens, Bandboo plans to conduct a fresh round of funding to raise capital for its new product research and expansion into new markets, such as Malaysia and Indonesia.
“People are curious because it is a retrenchment product which is relatively unheard of in Singapore. We have seen a fair amount of traction and queries so we remain optimistic,” said Mr Kee, adding that the start-up has also been making sales progress through its business-to-business (B2B) channels and collaboration with insurance agents.
Moving forward, the start-up plans to increase its offerings with both conventional and niche insurance products. It is also in talks with a Japanese insurance firm to automate claims for travel insurance.
With its products, the founders, who described themselves as “frustrated insurance consumers”, hope to shake up the insurance market.
To be sure, they are not alone.
“There were about 4 insurtech start-ups last year but this year, the number has doubled. Most are helping the incumbents to make certain processes more efficient but to change the industry, we thought we wanted to look at the entire model,” said Mr Kee.
“Insurance is often viewed as a necessity purchase that is burdensome so we want to redesign the products with the consumer in mind. Our P2P model, which monetises insurance as a service and rebates 100 per cent of the excess collected premiums, will be the first step to changing the industry,” he added.
PLAIN VANILLA P2P PLATFORMS NOT REGULATED: MAS
As stated on its website, Bandboo is not regulated by the Monetary Authority of Singapore (MAS).
Responding to queries, a MAS spokesperson said the P2P start-up is not subject to regulations as it does not “assume the insurance risks of individuals by making good any shortfall when claims exceed pooled contributions” or “arrange for contracts of insurance between the individuals and external insurers”.
While MAS does not regulate plain vanilla P2P platforms, it said it expects these platforms to disclose clearly and prominently their unregulated status and their consumers’ lack of access to the usual safeguards, such as access to FIDREC (Financial Industry Dispute Resolution Centre) and protection under the Policy Owners’ Protection Scheme.
The spokesperson added that MAS will continue to monitor international developments and changes to existing business models. “Where appropriate, MAS may introduce changes to the existing rules in future, including subjecting such platforms to regulation,” it said.