Irdai has decided to develop a 'regulatory sandbox' to enable testing of products in a controlled environment so that the industry could keep pace with the fast-evolving financial technology (fintech).
Loosely defined, a sandbox approach means experimenting and learning before finally adopting a technology or system. This approach helps in containing the impact of failures.
The insurance regulator has set up a committee to come out with a consultation paper on 'regulatory sandbox' approach, said a Insurance Regulatory and Development Authority of India (Irdai) circular Wednesday.
In recent years, the regulator said that new insurance companies and intermediaries have been applying technological innovations in their products and services.
"The authority encourages the companies to develop and apply new technologies into the financial ecosystem to enhance value for customers, increase efficiency, manage risk better, create new opportunities and improve people's lives," the circular said.
Irdai notes that as fintech solutions are becoming more common and sophisticated, a responsive and forward-looking regulatory approach will further enhance the ability of promising fintech innovations to develop and flourish.
"A 'regulatory sandbox approach' can be used to carve out a safe and conducive space to experiment with fintech solutions, and where the consequences of failure can be contained," Irdai said, while setting up the 10-member committee comprising Irdai officials and representatives of insurance companies and the World Bank.
The panel has been asked to dwell on key regulatory issues fin-tech poses across insurance value chain and study practices followed in financial sectors, like banking, among others.
It has been asked to prepare a consultation paper on sandbox approach and submit report within two months.
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