The Insurance Regulatory and Development Authority of India (IRDAI) has opened applications for its regulatory sandbox from September 15. The regulatory sandbox, introduced in May, provides insurtech in particular and the fintech sector as a whole with flexibility in dealing with regulatory requirements and at the same time focussing on policyholder protection.
“The Regulatory sandbox regulations define a) an applicant (insurer or insurance intermediary or a person other than an individual having a net worth of INR 10 Lakh and a standing of one financial year), b) regulatory sandbox and c) the sandbox environment,” the IRDAI statement had said.
The IRDAI had said that the objectives of these regulations are to strike a balance between orderly development of the insurance sector on one hand and protection of interests of policyholders on the other, while at the same time facilitating innovation.
It is also looking to facilitate the creation of regulatory sandbox environment and to relax such provisions of any existing regulations framed by the authority for a limited scope and limited duration if such relaxation is needed.
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The purpose is to introduce a ‘test and use process’ and help manage risk better for insurers, reportedly said Sujay Banarji, member, IRDAI, on Friday. He said that IRDAI is also testing applications to allow companies to apply online.
“Regulatory sandbox will foster collaboration and further the interests of all stakeholders, that is regulator, insurance companies, start-ups, and end consumers,” Banarji stressed.
Further, Randip Singh Jagpal, chief general manager, IRDAI, said that using the sandbox, innovation is expected both in products and services as well as technology.
“In terms of technology, this is expected in mobile technology, data analytics, blockchain, API integration, machine learning, and AI in designing and rating of products,” he said. He also explained that in products and services, innovations are expected in terms of digital KYC, smart contracts, cybersecurity, and developments around marketplaces.
The regulations will remain in force for two years. The categories of application include insurance solicitation or distribution, insurance products, underwriting and policy, and claims servicing. The applications are open till October 14.
The insurance space in India is currently dominated by banks and government agencies such as LIC, GIC, etc. Also, there are a plethora of insurtech startups such as PolicyBazaar, CoverFox, among others. However, currently, only 3% of insurance is bought online in India in an $80 Bn market. This share is likely to grow given the rising access of consumers to online insurance services.