How To Apply Online IRDAI Regulatory Sandbox
Regulators globally must secure customers’ interests without being overly stringent, paving the holistic environment wherein growth can prevail seamlessly. The concept of Regulatory Sandbox endorses this statement by enabling regulators to work closely with up-and-coming companies. Although not matured, authorities are increasingly using this concept to tailor their norms for hassle-free adherence. The concept of Regulatory Sandbox was introduced via IRDAI (Regulatory Sandbox) Regulations, 2019 on July 26, 2019.
The IRDAI regulatory sandbox objectively promotes innovation and consumer protection in the insurance sector by reducing regulatory burden. It also accelerates efforts towards the development of new goods and services. Read on to discover what exactly the purpose of the IRDAI Regulatory Sandbox is and its implications on the insurance sector.
Underscoring What is Regulatory Sandbox and its Significance
The term Regulatory Sandbox refers to a framework for testing new business models, applications, and processes that may lack regulatory control of the present system. It provides the scope for innovation so that new possibilities can emerge, providing benefits to consumers as well as the company.
While leveraging the regulatory sandbox, companies can make their innovations available to customers for feasibility checks in a secured environment with almost negligible regulatory hassles. The sandbox enables regulators to create new norms for technological advancement while keeping the tab on consumer interests. Additionally, it can aid in reducing marketing expenses and the risk of formulating norms alongside licensing issues.
The sandbox simplifies the regulatory hurdles, paving a foundation for hassle-free investment. Consequently, fintech firms can focus on key activities that drive growth instead of regulations. Sandbox empowers collaboration while innovation is its key driver, boosting the interest of fintech firms, consumers, and regulators.
Underlining the Postives of IRDAI Regulatory Sandbox
The sandbox methodology is a breakthrough for companies seeking to test their innovation in real-world scenarios, scouting new possibilities for advancement. While providing a fertile ground for innovation, this methodology reduces regulatory hurdles that may hinder the practicality of emerging innovations such as business models, processes, etc.
This also resolves the fundamental problem of investing ample funding for new product launches. The IRDAI Regulatory Sandbox creates a holistic environment that ensures the cost-effective launch of new products or services falling under the innovation, enabling regulators to determine the feasibility within the purview of current advancements.
Understanding Who Can Access IRDAI Regulatory Sandbox
IRDAI Regulatory Sandbox is available to the following entities:
Entities serving as Insurance brokers, Web aggregators, Insurance Marketing Firms (IMF), Corporate Agents, etc can apply for the sandbox.
Any person with a net worth of at least Rs 10 lacs during the erstwhile FY.
Any other entity that falls under the ambit of IRDAI.
All these entities can apply for one or more of the given categories.
- Insurance Solicitation or Distribution
- Insurance Products
- Insurance Underwriting
- Insurance Policy and Claims Servicing
- Any other categories that are deemed to be innovative
Who can qualify for the IRDAI Regulatory Sandbox?
Not all products or services fall under the innovation or advancement as per IRDAI unless they
- Promote innovation in the field of insurance.
- Serve the consumer interest and transform the way consumers avail services
- Enable the systematic expansion of the industry
- Have the ability to make the insurance sector more impactful than ever market-wise
- Meet the additional norms set forth by the competent authorities, including IRDAI
Step-by-Step Process To Secure Approval for IRDAI Regulatory Sandbox
Step 1: Proposal submission
The first step involves the preparation and submission of a proposal concerning the IRDAI Regulatory Sandbox. The proposal must reflect:
- The purpose for which the application is filed
- Subject matter that falls under the innovation or advancement
- Benefits and areas of concern of the innovation
- Subject matter’s functionalities
- Technologies and resources driving the innovation
- The market base served by the innovation
- Expected outcomes
The proposal must be as comprehensive as possible, reflecting the scope, potential, and real-world practicality of innovation in detail.
Step 2: Application Assessment
IRDAI then vets the application with the purview of governing legislation to determine compliance and feasibility. If the product is deemed fit for testing, the authority shall approve the proposal. Typically, a six-month timeline is granted to the applicant to test their innovation.
Step 3: Deployment Stage
If the testing ends up successful, the applicant can proceed with the deployment stage, meaning the comprehensive launch of the product.
Notably, an additional 6 months can be granted to the applicant in specific scenarios to bring their innovation to life, making the testing timeline 12 months. However, the applicant is required to wrap up all testing procedures within this timeline.
The Authority shall leverage the single point of contact (SPOC) to track the progress of the proposal, ensuring all-encompassing supervision. They can provide insights to reduce hurdles concerning the application, enabling peace of mind for the applicant. However, it is the onus of the applicant to deal with all the legalities concerning the proposal.
Grounds for the Extension of Permission
The IRDAI may grant an extension during application processing under the following situations:
- If the applicant requests the extension during the end of the 6 months, citing reasons for the same.
- If the Authority’s Chairperson considers the request viable
- If the extension timeline goes as high as 6 months only.
Grounds for Revocation of Sandbox Permission
The application concerning sandbox approval may confront rejection if:
- The chairperson believes that the request does not comply with Regulation 6
- The breach of norms cited under the Insurance Act of 1938, and the Insurance Regulatory and Development Authority Act of 1999 has been witnessed by the authority.
Notably, a fair hearing shall be given to the applicant before slapping the penalty in the form of rejection, providing the ground for reconsideration.
Post-Permission Norms to be Fulfilled by Applicant
Upon securing the authority’s permission, the applicant must abide by the following norms:
- No changes should be made to the subject matter without intimating the authority
- The integrity of the system must stay intact in all conditions.
- The data of policyholders should stay protected with no scope for breach
- Apt internal mechanisms should be employed to track and assess the control, process, systems, etc.
- Any changes made to the proposal’s execution should be shared with the authority
Points to Ponder For IRDAI regulatory Sandbox Proposal
Upon completing the allotted timeline, the applicant must share a report with the authority detailing how the proposal fulfilled its goals and feedback provided by policyholders alongside information sought by the authority. Plus, the applicant shall also provide a plan of action illustrating how the proposal will be incorporated into the regulatory framework.
The Authority may stamp its approval to adopt the proposal under the prevailing framework, including norms of the Insurance Act, of 1938, and the Insurance Regulatory and Development Authority Act, of 1999 while ensuring adherence to the objectives of the IRDAI Regulatory Sandbox proposal. All laws, rules, directives, circulars, etc., must come into effect on the date on which the prevailing framework is adopted.
If during inspection the authority finds any non-conformity concerning the adherence to the proposal objectives, the applicant may lose the right to share the proposal. Notably, an early termination of the proposal may come into effect if the applicant believes the project lacks the prowess to meet underlying goals.
The fate of the proposal is in the hands of the authority. They may, if the situation arises, revoke the continuance of the same.
Conclusion
The insurance sector is transforming like never before in the present era all thanks to the technological evolution and inclusion of the IRDAI Regulatory Sandbox. The launch of this methodology fosters a holistic environment for all insurance firms seeking innovation and advancement.
