Imagine if you paid car insurance premiums solely based on the distance you drove and not on the basis of owning a car. What a relief, right? Well, that’s the agenda behind tech-driven car insurance startup KOBA.
In 2022, car insurance was the second-most common kind of insurance held by Aussies, following closely behind health insurance. Car insurance represents a huge potential market in Australia, with gross written premiums currently totalling about $3 billion annually. As the number of vehicles across the country rises, the demand for insurance—especially seeing how it is mandatory—grows, too.
So, to cash in on the boom, insurance underwriting agency Ensurance (ASX: ENA) has invested $1.5 million into a car insurance startup, KOBA Insurance, via a Simple Agreement for Future Equity (SAFE).
As a result, the Company will have the right to distribute KOBA’s innovative data-driven car insurance product, where premiums are calculated on a per-kilometre basis. In turn, KOBA will benefit from Ensurance’s broker distribution network and head-office corporate infrastructure to expand its market share. The companies are targeting low-usage drivers that rarely use their cars but end up paying heavy premiums.
Ensurance CEO, Tom Kent, commented, “This is a hugely compelling investment and growth opportunity for Ensurance, with KOBA’s unique kilometre-based premiums offering the potential to significantly reduce insurance costs for low-usage drivers. With people increasingly working from home, and with a growing focus on reducing car use to minimise carbon emissions, I believe KOBA’s products will be a very attractive offering to a growing number of vehicle owners.”
Insurance premiums are no joke, and often, you end up paying even if you barely drive your car. Launched in November 2021, KOBA is a private Australian startup offering a data-driven approach to car insurance. Users pay a fixed amount to have their car insured while it’s parked, and then pay only for the distance they drive, thus saving them money (a huge bonus in the current inflation-ridden environment).
Your car usage is measured through a small matchbox-sized device called a “KOBA Rider” that attaches to a car’s On-board Diagnostics (OBD) port. This communicates with the KOBA smartphone app to automatically calculate driving distances and charges a per-kilometre rate for each trip. This per-kilometre insurance premium model offers the potential to deliver significant cost savings for low-usage drivers.
As per the agreement, Ensurance will make a cash payment of $1.5 million to KOBA in exchange for a contractual right to convert that amount into shares upon pre-agreed milestones. The investment will be made in up to five separate tranches over a two-year period. Plus, Ensurance’s CEO, Tom Kent, will join the KOBA Board as a Non-Executive Director, with KOBA to also benefit from access to Ensurance’s established back-office systems and support to help enhance its offering and expand its market share.
Koba CEO, Andrew Wong, said, “There hasn’t been much innovation in the Australian car insurance market for a few years, so it’s very exciting to have an established partner who understands the insurance business and shares our vision for delivering customer-first solutions.”
Given that about three million Australians switch their car insurance providers every year, Ensurance sees a significant growth opportunity in its KOBA collaboration. Moreover, seeing the current inflationary environment and rising prices, the Company hopes that more people adopt KOBA’s product.
Alinda is a Business Reporter for The Sentiment
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