This week Vermont passed legislation that creates a regulatory sandbox for the development of a new generation of innovative insurance products, services and technologies.
Vermont Governor Phil Scott signed into law Senate Bill 131 this week, creating a regulatory sandbox that gives the Department of Financial Regulation the authority to grant targeted regulatory waivers. These will enable the development of innovative financial products and services that can be developed, tested and brought to market more quickly and efficiently.
It can be difficult to develop innovative products and services in the traditional regulatory environment, which discourages new approaches to business that may not be properly understood by consumers. The regulatory sandbox concept enables insurers and regulators to pilot test new approaches, to assess how they work and if necessary refine them.
For example, the sandbox could be used to test new ways to improve the claims process or other techniques to increase efficiencies and improve overall customer satisfaction.
Vermont is not the only jurisdiction to have had the idea of a regulatory sandbox for the insurance industry. In July 2018 the Bermuda Monetary Authority (BMA) launched its Innovative Regulatory Sandbox Regime that was also intended to promote the development of a new generation of insurance products. In May the BMA granted its first sandbox license to insurtech AkinovA, an electronic marketplace for the transfer and trading of re/insurance risks.
Other US states have also looked at the idea. Earlier this year US District of Columbia mayor Muriel Bowser established a council charged with studying and reporting on the feasibility of implementing a financial services regulatory sandbox in Washington DC.
As well as creating the sandbox, Vermont’s new law also includes provisions that repeal SLIMPACT and standardise the premium tax rate for multistate risks.
The American Property Casualty Insurance Association (APCIA), a trade association representing nearly 60 percent of the US property casualty insurance market, has come out in favour of the sandbox idea.
Alison Cooper, vice president of APCIA’s northeast region, said: “The regulatory sandbox concept provides the best of two worlds. It creates a climate where new and innovative ideas can be tested in the marketplace, while ensuring that consumer protections are not compromised. It also ensures that a level playing field is maintained for insurers both inside and outside of the sandbox.”
Vermont, regulatory sandbox, American Property Casualty Insurance Association, APCIA