IDRA issues Insurance Regulatory Sandbox

The insurance regulator issued a 'regulatory sandbox' guideline on Wednesday which would pave the way for testing new insurance products or services by third-party IT professionals or IT businesses.
The Insurance Regulatory Sandbox (IRS), the first of its kind in the country, is planned to introduce new concepts and products in line with fast-changing economic operations amid the Fourth Industrial Revolution (4IR).
There are several fields under its scope, like insurance-product development and marketing, claim settlements and underwriting.
The Insurance Development and Regulatory Authority (IDRA), which governs 81 insurers, sent the guideline to all life and non-life insurers along with BASIS, the country's software sector apex trade-body, to take actions regarding the matter.
As designed, the IRS would reduce regulatory hurdles for the companies that want to introduce new concepts and products in line with the speed of development in insurance technologies.
Apart from the world's developed regions, like Europe and the US, such sandbox is also available in the neighbouring countries, like India, Pakistan and Malaysia.
The modus operandi in the guidebook is applicable to the insurers along with any financial institution, insurtech or start-up, and individual or institution that the regulator allows.
An executive of the IDRA told the FE that it has mainly targeted the IT businesses and professionals, who would develop products, e-commerce, claim-settlement services, or underwriting matters under the sandbox.
It is important, as now there are many issues that do not match with or covered under the traditional regulatory rules and regulations.
He mentioned that there are uses of artificial intelligence (AI) in many issues, including rate-making, but the regulator may not approve these. Now, under the regulatory sandbox, any fintech or start-up may propose these for introduction.
"We believe that many innovative ideas and thoughts may revolutionise the industry under the sandbox," he said on an upbeat note about the upcoming insurance promoter.
The regulator would give permission for innovations as test cases or feasibility studies, and later those would be introduced to the insurance industry, he added.
Another insider in the IDRA told the FE that Bangladesh's insurance industry is not growing as expected due to various reasons, one of which is lack of innovative ideas.
The regulatory sandbox might help overcome such hurdles and look for ways to incorporate the AI-driven revolutionary changes.
He opined that engaging the insurers as well as encouraging forward-thinking and developing new products and services would strengthen them financially.
Narayan Chandra Rudra, Chief Executive Officer (CEO) of Meghna Life Insurance Company, told the FE that this is a good move by the regulator, as it might give some innovative products and services to the industry.
"We think we may get services in other areas also, like marketing, human resource management and maintaining our accounts."
Mr Rudra told the FE that this has opened up avenues for non-insurance IT people.
"They may contribute much to the industry through innovations."
Bangladesh lacks actuaries to develop new products, whereas there are many people who have innovative ideas for designing products, he added.
Dr. Nurur Rahman, a US-based data scientist, told the FE that worldwide the insurance industry uses traditional tools and methods for actuarial rate-making that are limited in scopes and capabilities.
"This is where AI comes into play, providing a new standard of pricing models with significantly improved performance."
"Sandbox will give the businesses scopes to develop services that might be outside of the status quo and encourage the companies to explore ideas that will better serve their employees as well as customers."
AI can play a significant role in actuarial rate-making for the insurance industry in Bangladesh by helping the insurers analyse data, create sophisticated yet explainable predictive models, personalise rates, and streamline rate-making process, he added.

jasimharoon@yahoo.com