IRDAI – Insurance Regulatory and Development Authority of India, opened Applications For the Insurance Regulatory Sandbox from 15th September 2019. The applications are open till October 14. IRDAI said that the purpose is to introduce a test and use process, and it is also testing applications to allow companies to apply online.
The regulatory sandbox was introduced in May 2019, which 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.
According to IRDAI, the Regulatory sandbox regulations must be as follows :
i) an applicant or 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,
ii) regulatory sandbox and
iii) the sandbox environment.
The IRDAI said that the objectives of these regulations are to strike a balance between orderly development of the insurance sector and for the protection of interests of policyholders, while facilitating innovation.
IRDAI is additionally hoping to encourage the making of regulatory sandbox environment and to relax such arrangements of any current guidelines framed by the authority for a constrained degree and restricted span if such relaxation is required.
Sujay Banarji, member of IRDAI said that the purpose is to introduce a ‘test and use process’ and to manage the risk better for insurers. He said that the IRDAI is also testing applications to allow companies to apply online.
Banarji also said that the “Regulatory sandbox will foster collaboration and further the interests of all stakeholders, that is regulator, insurance companies, start-ups, and end consumers”.
Later Randip Singh Jagpal, a chief general manager of IRDAI, said that using the sandbox, innovation is expected both in products and services as well as technology.
Randip Singh also said that, “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 also said that in products and services, innovations are expected in terms of digital KYC, smart contracts, cybersecurity, and developments around marketplaces.
These 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 will be open till 14th October 2019.
The insurance space in India is currently dominated by the banks and the government agencies such as LIC, GIC, etc. Also, there are a plethora of insurtech startups such as PolicyBazaar, CoverFox, among others. 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.