ASX-listed insurer Suncorp Group wants to see tenancy laws across the country updated, so the rising cohort of renters can have an alternative to stumping up for a costly bond at the beginning of a tenancy.
Suncorp is readying to offer a surety bond to landlords via its Terri Scheer landlord insurance network. The product, called Trustbond and created by Spanish startup Traity, lets tenants avoid paying a traditional bond and instead pay a premium, which is a proportion of the rent paid for the term of the lease.
Instead of paying what can often be thousands of dollars up front renters instead would pay as little as hundreds. A renter paying a $2000 bond would instead pay a one off fee of $250. It covers the same breaches of a tenancy agreement including unpaid rent, damage, broken leases and associated costs,
Trustbond uses blockchain to measure the potential trustworthiness of a renter using data from social networks like Facebook, Twitter, LinkedIn, Airbnb, eBay and Uber to determine a tenant’s TrustScore.
But so far South Australia is the only state that has tenancy laws allowing for such an option according to Traity chief executive Juan Cartagena.
“Currently it is a no-go in Queensland and the law is unclear in NSW, so we are getting further legal advice. We hope to get an agreement from the authorities because Trustbond will help people access affordable housing,” he said.
“Some tenancy laws have not caught up to the changing demographics where more people are renting, but we believe that this can change.”
According to figures from the NSW Rental Bond Board for 2015 to 2016, it held nearly 80,000 residential rental bonds, totalling $1.31 billion.
‘Renting is the new normal’
Louise Dwyer, the newly appointed executive general manager of global partnerships at Suncorp, said “renting is the new normal” for many people.
“Being able to help them to release capital and use it in a different way is a huge advantage for our customer base,” she said.
“It [Trustbond] helps to make the rental market that much more affordable and we can use the data to make different decisions about lending criteria in the future.”
The most recent census data revealed the trend towards renting rather than owning is continuing. Australians who own their own home declined from 32.1 per cent in 2011 to 31 per cent in 2016. In contrast people renting increased from 29.6 to 30.9 per cent in 2016.
Ms Dwyer added added that Traity’s Trustscore could be used when determining loans in the future, while Mr Cartagena envisages a time when the Trustscore would be recognised in multiple countries, to help them secure rental properties if the move overseas.
Traity is the second start-up Suncorp has partnered with as it pushes forward with the rollout of its marketplace strategy.
In August, Suncorp CEO Michael Cameron said he needed more time to prove to investors that his strategy of creating a marketplace of financial services products strategy can work, after announcing the company will invest another $100 million in it.
In 2016, it snapped up a $US5 million equity stake in fintech start-up, Trov, designed to give consumers insurance for their individual possessions whenever it’s needed and Ms Dwyer said due to the success of that partnership, Suncorp is looking to expand it.
‘We are learning things together’
“We’ve started with single item cover and were looking at broadening the scope. We’re calling it Trov 2.0. It’s definitely not a procurement relationship, it’s a partnership where we are learning things together,” she said.
Suncorp’s relationship with Traity began in March this year when it piloted a chatbot named Kevin that used blockchain to insure consumers’ peer-to-peer online transactions.
For now Suncorp isn’t taking an equity stake in Traity, but said it derives value from the relationship by not having to build “new products” themselves.
“If we tried to build all the solutions ourselves, that would take time, so when we know there are great partners out there. By partnering we can scale and move more quickly that we have historically,” said Ms Dwyer.
“We’re trying to forget that we are an insurance company and a bank and life insurance company, and were moving the organisation to be a platform or a marketplace,” he said.
The trend to offering bond cover is gathering steam with Snug, one of the first start-ups to be housed in IAG’s Firemark Labs accelerator, also offering a surety bond type product.
Renters can purchase BondCover for around 5 per cent of the face value of the rental bond, and are provided with a certificate of guarantee to give the owner or agent to replace a cash bond.
“The current cash bond system is completely outdated, and the resulting liquidity and opportunity cost for renters is astronomical,” said Snug founder Justin Butterworth.
“The world has changed since the cash bond system was designed. It’s 2017, we have the technology to better manage identity, reputation, and recourse to create a more efficient securitised rental bond system. The days of the cash bond are over.”
The company is accepting BondCover renter applications in the ACT, NSW, SA, Tasmania and WA and is in negotiations with the Victorian government.