Irdai has created a regulatory sandbox for bringing to the market innovative approaches, including fintech solutions, to push insurance penetration while protecting policyholders.
In order to experiment with innovative approaches including fintech solutions, the insurance regulator has created a
regulatory sandbox. It will provide flexibility in dealing with regulatory requirements and focus on the core issue of policyholder protection. The sandbox approach will also help to strike a balance between development of the insurance sector and protecting the interest of the policyholders.
An applicant wanting to promote any innovation in insurance will have to demonstrate to the regulator that it will help increase insurance penetration and provide enhanced services to the policyholders. The regulator may consider granting limited regulatory relaxation
to the proposal that promotes innovation in insurance.
The Insurance Regulatory Development Authority of India (Irdai) guidelines on the operational issues pertaining to the regulatory sandbox states that prior consent of the customers will have to be taken regarding their willingness to participate in the proposal. The applicant will have to ensure that the customers participating in the proposal are clearly informed that they are participating in a proposal whose outcomes are not certain. The proposal for the new product will end if the number of customers enrolled touches 10,000 or premium collected is Rs 50 lakh or any other parameter decided by the authority. An application for innovation in insurance involving underwriting or product categories or both will have to be filed by an applicant in association with any insurer.
The application will have to specify the regulatory provisions that need relaxation to execute the proposal, provided the regulator reserves the right to limit the relaxation. The applicant will also have to specify the potential risks that are inherent in the proposal as well as measures taken to eliminate or mitigate the risks. The applicant will have to put in place measures for closely monitoring the implementation of the proposal and will have to update the board periodically.
The guidelines have underlined that the expenses incurred on the proposal will be maintained separately and shown as a line item in the annual report. In case of insurers, such expenses will be charged to the shareholders’ accounts or its equivalent.
Migration, revocation of permission
If the policyholder does not continue with the service or product, then the insurer will have to honour the existing liabilities in accordance to the agreed terms and conditions. At the time of launching an innovative product, the insurance company will have to keep the personal information collected during the course of the business transaction confidential and prevent its misuse. The insurance company will have to put in place measures to maintain confidentiality of policyholders’ data and adequate systems to prevent manipulation of records and transactions and the safeguards put in place will have to be reviewed on a continuous basis.
The insurance company will have to put in place a mechanism to address policyholders’ grievances and attend to them within the time-frame specified by the regulator. The insurer or the insurance intermediary will be responsible to dispose of the grievances in accordance with the extant regulatory norms. The insurer will have to report to the regulator any regulatory or supervisory action taken against the proposal by a government or other regulatory authorities with full details, including the penalty imposed or administrative action taken and the remedial steps taken by it to prevent such recurrences.
Irdai may revoke the permission to the innovative products if it finds that the products are not meeting the conditions given in the regulation or the products are violating the provisions of the Insurance Act, Irdai Act or other applicable laws. At the end of six months, the insurer can seek extension of time and provide valid reasons for the extension. On completion of the time period of the proposal, the insurer will have to submit a report to the authority on how the proposal met the objectives of