A committee of insurance regulator IRDAI has favoured creation of a facilitating environment to support deployment of tech innovation, similar to fintech products, in the sector.
Encouraging deployment of Insurtech – which is the equivalent of Fintech in insurance – will help reach new segments of customers, reduce costs of transaction, improve customer service as well as increase operational efficiencies.
Support and advisory
The Committee on Regulatory Sandbox in Insurance Sector in India, in its report, recommended the creation of a core Sandbox Committee by IRDAI with dedicated personnel to monitor and supervise the digital innovation activities. The proposed committee would provide support and advisory to the applicants.
Sandbox, which in the IT world, is a closed testing environment designed for experimenting safely with web or software projects. The concept is also being used in the financial service sector and referred to as Regulatory Sandbox.
According to the report, a regulatory sandbox environment in insurance would provide a safe and secure test environment for insurers to execute their ideas and innovations. It is a ‘safe space’ in which businesses can test innovative products, services, business models and delivery mechanisms which may not have been possible to achieve outside this sandbox due to regulatory considerations.
The proposed Sandbox Committee of IRDAI would facilitate roll-out of the experiments and seek to provide the ecosystem required for the experimentation, said the report of the panel on Regulatory Sandbox set up in September under the chairmanship of chief general manager Randip Singh Jagpal. For the report, the committee had sought views from all insurance, reinsurance companies and foreign reinsurance branches in India.
Laying down the norms as well as coming up with a draft guideline, the report said insurers, insurance intermediaries or any other entity other than an individual having a minimum net worth of ₹25 lakh for last three years are eligible to apply with an idea.
Broadly, the innovation should be in the areas of insurance solicitation or distribution; insurance products; underwriting; and policy and claims servicing.
The permission, for testing the innovation, will be for six months, extendable by another six months.