THE Insurance Commission (IC) issued guidelines on the adoption of a regulatory sandbox framework, requiring insurance technology (insurtech) firms to secure approval from the regulator.
Insurance Commissioner Dennis B. Funa issued Circular Letter No. 2020-73 dated June 14 outlining the guidelines on the use of regulatory sandboxes, requiring firms to secure prior approval from the IC before these are implemented.
“No Regulatory Sandbox that involves the doing an insurance business, as defined in Section 2 (b) of the Insurance Code of the Philippines, as amended by Republic Act No. 10607, or the performance of any act that will require licensing and/or regulation by this Commission shall be adopted and implemented unless approved by this Commission,” the circular read.
A regulatory sandbox is a controlled environment where a licensed insurance provider will set up a system to allow “small scale and live testing of technical innovations” in different scenarios.
“(IC) recognizes the immense benefit that can be derived from further developing such technological innovations (insurtech) through experimentation, testing, and learning, which can be achieved without necessarily compromising the protection of the interests of the insuring public,” it said.
It said non-regulated entities wanting to join a regulatory sandbox will have to comply with IC’s existing regulations first and submit an application.
A regulatory sandbox should be operated in experimentation cycles that will have to be approved by the IC, with a maximum period of one year with period extension of up to six months.
The IC also requires firms to submit several documents such as registration documents and consent of test subjects if it will apply to participate in a regulatory sandbox.
Applicants will also have to submit an “exit plan” from the regulatory sandbox that will contain a methodology of scaling up the project for a larger market; a plan for clients in case the proposal is discontinued; and the amount allotted to implement the technological solution “that shall be intended as payment for any claims arising from said implementation or adoption thereof, which shall be unimpaired at all times.”
The applicants will be screened based on the idea itself, how it can promote better access to insurance and literacy to the industry, consumer benefit and protection, project readiness and the soundness of the “exit plan.”
The regulator’s Regulation, Enforcement, and Prosecution Division (REPD) will submit a recommendation to the IC based on its assessment of the application and documents.
The IC will then allow the applicant to proceed with the live testing or experiments if it is “satisfied with the recommendations of the REPD.”
Participants need to submit a completion report to the regulator after the experimentation cycle has ended.
“The applicant’s failure to comply with any of the provisions of this circular letter shall warrant the immediate denial of the application,” it said. — B.M. Laforga