The insurance subscription model charges a regular fee for peace of mind: priority access, preventive care, or repair and replacement if something goes wrong. Small businesses use it as maintenance agreements, pet and dental wellness plans, care plans and extended cover. It works when you cap your exposure and mostly cover your own services, not third-party costs you can't control.
Key takeaways
- Customers pay for peace of mind, so the model is sticky: cancel the plan and you lose the cover.
- Babylon Health went from a $4.2 billion valuation to a roughly £500,000 asset sale after taking on risks it couldn't price.
- The safest insurance-style plans cover your own time and services, with clear caps and annual repricing.
- In Australia, a plan that pays for losses can be a financial product or insurance, so get advice before you launch.
When I wrote The Subscription Playbook, I used Babylon Health as my example of how a smaller business could use the insurance model.
Dr. Ali Parsa founded Babylon in 2013 with a grand goal: affordable healthcare for everybody. Its app offered "GP at Hand," 24/7 access to a doctor, for £149 (about $200) a year. You paid for peace of mind. You knew you could reach a doctor any time.
It was a brilliant spin on the model.
Then it wasn't.
In June 2021 Babylon agreed to go public through a SPAC deal at a $4.2 billion valuation. It expanded hard into the US, contracting with health plans to manage the care of their members. That's a far riskier business than selling access to a GP for a fixed fee. Losses mounted. Contracts that made up nearly half of its 2022 revenue weren't renewed. In August 2023 its US entities filed for Chapter 7 liquidation, and the UK business, which had served more than 700,000 patients, was sold for about £500,000.
I've kept Babylon in this page on purpose. It's now the clearest lesson in how the insurance model works, and how it breaks.
What Is the Insurance Subscription Model?
Almost everybody has insurance, so we know how it works. You pay a monthly premium to insure something: your home, your car, your life. In return, someone guarantees protections, and payments, if something happens.
We pay for peace of mind.
Insurers are some of the world's biggest businesses because they have a recurring revenue model tied to something everybody needs. But you don't have to be an insurer to use the idea. Plenty of small businesses sell peace of mind:
- Maintenance agreements: two air-conditioning services a year, priority call-outs, discounted repairs.
- Wellness plans: vets and dentists bundling preventive care for a monthly fee.
- Care plans and extended cover: GoPro's subscription includes camera replacement. Cancel the subscription and you lose the cover.
- Premium support: guaranteed response times for software or IT customers.
That last GoPro point matters. The insurance element doesn't have to be your whole model. It can be the stickiest ingredient in another one.
The Golden Rule: Cover What You Control
Here's the difference between Babylon's first model and the one that sank it.
The first sold access to Babylon's own service for a fixed fee. Babylon controlled the cost.
The second took on the cost of other people's healthcare. Babylon couldn't control it.
So my rule for small businesses is simple: offer insurance-style plans for your own time and services, not for third-party costs you can't cap. Then set limits, and reprice every year.
| Lower risk (you control the cost) | Higher risk (you don't) |
|---|---|
| Scheduled servicing and check-ups | Paying for any repair, whatever the cause |
| Priority booking and response times | Covering parts you buy from third parties at any price |
| Member discounts on repairs | Unlimited call-outs |
| A set number of included visits | Accidental damage, theft or loss |
| Replacement of your own product for defects | Open-ended guarantees with no cap |
Insurance-Style Subscription Examples in 2026
Vet wellness plans. Banfield's Optimum Wellness Plans in the US bundle exams, vaccinations and diagnostics, and Banfield says members save at least 30% on average when they use all the included services. In Australia, Greencross Vets' Healthy Pets Plus costs A$660 a year (A$696 for seniors), payable fortnightly. See how vets built wellness memberships.
Dental membership plans. More than 70 million US adults have no dental insurance. Practices now sell in-house plans covering cleanings, exams and X-rays plus a discount on treatment. A vendor study reported net production 17% higher for plan patients than for insured patients. That figure comes from a company that sells the software, so treat it as directional. Read the dental membership case study.
Trades maintenance agreements. One ServiceTitan customer, Atlantic Refrigeration, grew from 16 to more than 50 maintenance contracts while service revenue rose from $1 million to $1.8 million over three years (a vendor testimonial). Read the HVAC maintenance plan story and the trades playbook.
Insurance start-ups. Some of 2026's fastest-growing subscription businesses are real insurers. Sweden's Lassie turns pet insurance into a prevention membership, with app courses that earn points off the premium, and reports €100 million ARR. Hong Kong's Bowtie sells insurance online without agents and reports retention above 93%.
Why maintenance plans pay twice
Contractors report that the repair and replacement work from plan members is worth more than the plan fees themselves. The plan keeps technicians busy in quiet seasons, and when the old unit finally dies, the member calls the business that's been looking after it for years. The peace of mind sells the plan. The relationship sells the next job.
Who Should Use the Insurance Model (and Who Shouldn't)?
It suits you if:
- Your customers own something that needs regular care (a pet, teeth, a car, an air conditioner, a website).
- Failures are stressful and costly for the customer but predictable on average for you.
- Included visits create follow-on work you'd want anyway.
Steer clear, or get advice first, if:
- You'd be covering costs you don't control, like third-party repairs or medical bills.
- A few customers could claim far more than they pay, with no cap.
- What you're offering mostly duplicates rights customers already have. More on that below.
A Sample Peace-of-Mind Plan
An illustrative plan for an Australian air-conditioning business (prices are examples only, GST included):
| Care | Priority | Total Care | |
|---|---|---|---|
| Monthly fee | A$19 | A$35 | A$59 |
| Scheduled services | One a year | Two a year | Two a year |
| Response time | Standard | Within 48 hours | Within 24 hours |
| Call-out fee | Standard | Waived | Waived |
| Repairs | 10% off | 15% off | Labor included, up to A$1,000 a year |
| Waiting period | None | None | 30 days for repair cover |
Notice the cap and the waiting period on Total Care. That's where the risk sits, so that's where the limits go.
Check the numbers before you take on the risk
Australian business owners can book a free 30-minute Subscription Profit Review with a BPAG adviser to talk through whether a care plan suits the practice.
How Do You Price an Insurance-Style Plan?
You're pricing two things: the services you'll definitely deliver, and the claims you might have to pay.
Annual plan cost per member = Cost of included services + (Share of members who claim × Average claim cost) + Admin
Worked example: the Priority plan
Two services a year cost the business about A$90 each in labor and materials: A$180. Waived call-out fees and repair discounts cost about A$60 per member per year on average (assume 15% of members need a repair averaging A$400 of cost). Admin and billing: A$20. Total cost: about A$260 a year. The plan earns A$420 a year including GST, about A$382 ex-GST, leaving about A$122 per member, or roughly 32% margin. If repair claims double in a hot summer, margin falls to about 16%. That buffer is why you price for a bad year, not an average one.
Model the effect on your whole business, including cash flow and valuation, with the Subscription vs One-off Profit Calculator.
Subscription vs One-off Profit CalculatorSee how switching to subscription changes revenue, cash flow and valuation.Open the free tool →What Are the Risks, Especially in Australia?
Mispriced risk. If claims outrun fees, the model works in reverse. Reprice annually on real claims data.
Customer concentration. Babylon lost nearly half its revenue when one group of contracts wasn't renewed. Keep any single customer well under 10% of revenue.
Selling rights customers already have. Under the Australian Consumer Law, customers have automatic consumer guarantee rights. The ACCC says extended warranties are optional, that a business "must not pressure or mislead consumers to buy an extended warranty," and that businesses should explain what it provides over and above those automatic rights. See Australian Consumer Law and subscriptions.
Accidentally selling insurance. ASIC says extended warranties are generally financial products, and that some may amount to insurance, which needs APRA authorization as well as an Australian financial services licence. A plan is more likely to be insurance if it covers accidental damage, theft or wear and tear rather than defects. A manufacturer's or retailer's warranty that only covers repair or replacement is more likely to be exempt. This is general information as at October 2026. If your plan pays for losses beyond your own services, get legal advice before you launch, and read ASIC's guidance on extended warranties.
How Do You Combine the Insurance Model With Others?
- Member benefits plus insurance is GoPro's formula: storage, discounts and replacement cover in one plan. See the member benefits model.
- Bundled services plus insurance is the vet and dental plan: preventive care bundled, with a discount on everything else.
- SaaS plus insurance is premium support, backups and uptime guarantees on a higher tier.
- Minimum commitment plus insurance protects you from customers who join the week before a big claim. A 12-month term and a waiting period do the job.
For industry-specific versions, see the vet clinics playbook and the dental practices playbook.
What to Do Next
- List the moments your customers worry most about. That's what peace of mind is worth.
- Separate the services you control from the costs you don't. Build the plan from the first list.
- Estimate claims from your own job history, then add a buffer for a bad year.
- Write the inclusions, exclusions, caps and waiting periods on one page.
- If any part of the plan pays for losses, talk to a lawyer before launch.
What do your customers lose sleep over? If you can take that worry away for a monthly fee, you have an insurance model.
Frequently asked questions
Is a wellness plan the same as insurance?
No, and you should say so clearly. A wellness or care plan covers routine, predictable services, like check-ups and vaccinations, plus discounts. Insurance pays out for unpredictable events, like an accident or illness. Consumer group CHOICE has cautioned pet owners to check whether they'd actually use a plan's inclusions. Being upfront about what isn't covered reduces complaints.
What should an insurance-style plan include?
Lead with the predictable services that create peace of mind and bring customers back: scheduled servicing, check-ups, inspections. Add priority access, which costs you little but feels valuable. Then add a capped benefit for when things go wrong, such as discounted repairs or a set number of call-outs. Avoid open-ended promises to cover whatever breaks.
How do I stop a few customers costing me a fortune?
Cap the exposure. Set limits on visits or claim value, apply a short waiting period before cover starts, exclude pre-existing problems, and use fair-use terms. Then reprice every year based on what members actually claimed. Babylon Health's collapse is the extreme version of what happens when the costs you underwrite grow faster than your fees.
Can a software business use the insurance model?
Yes. Premium support, guaranteed response times, data backup and restore, security monitoring and uptime credits are all peace-of-mind benefits. The Subscription Playbook suggests software developers often add elements of the insurance model to SaaS. Customers on a higher tier aren't paying for more features; they're paying to know someone will pick up the phone.
What's a good price for a maintenance plan?
It depends on your costs, but residential HVAC plans in the US typically run about $150 to $500 a year, or $15 to $30 a month, according to industry guides. Work up from the cost of the included services plus your expected repair cost per member, then add a margin and a buffer for bad years.
Talk it through with a BPAG adviser
Free for Australian business owners: a 30-minute Subscription Profit Review on whether a subscription suits your business.
Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- Reuters: Babylon to go public via $4.2 billion SPAC deal (3 June 2021)
- HLTH: Bankrupt Babylon sells UK assets for $620,000 (20 September 2023)
- ASIC: Extended warranties
- ACCC: Warranties
- Banfield Pet Hospital: Optimum Wellness Plans
- ServiceTitan: Service agreement software (vendor testimonial)
- Dental Economics: Why dental membership plans are outperforming insurance (Clerri study, November 2025)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.