At Bandboo, we pride ourselves in enabling the lowest possible cost of insurance through a 100% unconditional rebate of unused premiums. As the premium is $35 a month, we are often asked how much our unemployment insurance will actually cost after the rebate.

In this blogpost, let us provide a quick and simple analysis based on the past ten years. This ten-year period includes the Global Financial Crisis, during which Singapore’s resident unemployment rate rose from 3.2% in 2008 to 4.3% in 2009.

Two key pieces of data are needed for our analysis:

1. Redundancy incidence

2. Median gross monthly income

Redundancy refers to people who either have been retrenched or released from their work contracts prematurely. Median gross monthly income gives us a sense of how much the average person in Singapore earns, inclusive of employee’s CPF contribution but excluding the employer’s portion.

At Bandboo, you receive a payout comprising three months of your salary (capped at $18,000) when you experience an involuntary loss of job, such as through retrenchment. In our analysis here, we assume that everyone who has been retrenched remains unemployed for three months and hence claims the full three-month salary payout.

The monthly premium can be calculated with the simple formula below:

(Redundancy incidence per 1000 members x Median gross monthly income x 3 months of payout) ÷ 1000 members ÷ 12 months of premium payment

An overview of the monthly premium required based on this simple formula is presented here:

Over the past ten years, the highest premium eventually paid would be $9.23 a month during the worst of the Global Financial Crisis in 2009. The next highest was last year, when our economy was said to be “in for a tough period that will last for a while”.

If the actual premium paid is so low, why do we have to collect $35?

The reason is that Bandboo’s system has been stress tested to ensure that it can withstand various doomsday scenarios and continue to pay out claims. But we shall not bore you with technical details like how we modelled probability distributions or run Monte Carlo simulations.

To put it simply, this $35 a month premium creates a large enough safety buffer so that you need not worry that the pool of money on the platform runs out during severe recessions. In good times, when actual premium used is way less than $35, you receive the entire portion of the premium that is left.

Where else in the world do you get to have your cake and eat it?