At the NAIC’s Innovation and Technology Task Force meeting held last week in Hawaii, the American Insurance Association (“AIA”) urged state insurance regulators to adopt legislation that would create “sandboxes” wherein certain regulatory requirements would be waived for insurers looking to pilot innovative insurance products, services and technologies. AIA asserted that insurance regulators should consider the use of sandboxes because of the need to adapt to a technology-driven world with innovative new products and services. Such innovations can help improve understanding and mitigation of risk, as well as efficiency, AIA said. AIA noted that several other countries, including Australia, Singapore and the United Kingdom have all used regulatory sandboxes.
AIA asked the Innovation and Technology Task Force consider adopting AIA’s Insurance Innovation Regulatory Variance or Waiver Act (“Model Law”). The Model Law would authorize insurance regulators to grant variances, waivers, or no-action letters with respect to regulatory requirements that make it more difficult to introduce new insurance technologies, products or services. Under the Model Law, regulators would also be authorized to attach terms and conditions meant to protect consumers to such variances or waivers.
However, producer trade groups have expressed concern about the Model Law and similar ideas. For example, the Independent Insurance Agents & Brokers of America, Inc. said that such a relaxation of regulatory standards may create an uneven playing field whereby certain insurers will be able to offer more competitive products than their competitors who are subject to stricter regulatory scrutiny. That kind of situation may unfairly harm agents and consumers, they said.
We will continue to monitor this and other developments at the Innovation and Technology Task Force.