The Insurance Regulatory and Development Authority of India (IRDAI) has introduced the Regulatory Sandbox Regulations, 2025, effective upon their publication. These regulations aim to foster innovation in the insurance sector while ensuring policyholder protection and orderly sector development. They establish a controlled environment for testing new insurance models, processes, or technologies by relaxing certain regulatory provisions for a limited period. Eligible applicants, including insurers, intermediaries, and specified entities, must apply electronically and meet criteria set by the Competent Authority. Permissions are granted based on the potential benefits to the sector, including increased efficiency, improved insurance penetration, and ease of doing business.
The experiment period is monitored closely, and applicants are responsible for compliance, safeguarding data, and addressing liabilities. Permissions may be revoked if conditions are unmet or violations occur. At the conclusion of the testing phase, applicants must report outcomes and propose integration into the existing regulatory framework. Extensions are limited and contingent on performance analysis. The regulations also accommodate inter-regulatory sandbox proposals and provide the Authority with powers to inspect, investigate, and issue clarifications. The 2019 Regulatory Sandbox Regulations are repealed under this framework. These updates are expected to streamline innovation while maintaining sector stability and compliance with applicable laws.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
NOTIFICATION
Hyderabad, 1st January 2025
Insurance Regulatory and Development Authority of India (Regulatory Sandbox) Regulations, 2025
F. No. IRDAI/Reg/5/212/2025.- In exercise of the powers conferred by clause (zd) of sub-section 2 of Section 114A of the Insurance Act, 1938 (4 of 1938) read with clause (e) of sub section (2) of Section 14 and section 26 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), the Authority, in consultation with the Insurance Advisory Committee, hereby makes the following regulations, namely: –
CHAPTER I
PRELIMINARY
1. Short title and commencement:
(1) These Regulations may be called the Insurance Regulatory and Development Authority of India (Regulatory Sandbox) Regulations, 2025.
(2) These Regulations shall come into force on the date of their publication in the Official Gazette.
(3) These Regulations shall be reviewed once every three years from the date of publication of the IRDAI (Regulatory Sandbox) Regulations, 2025, unless a review, repeal or amendment is warranted earlier.
2. Objectives: The objectives of these Regulations are:
(1) To facilitate innovation in the insurance sector while ensuring orderly development of the insurance sector and protection of interests of the policyholders
(2)To facilitate creation of regulatory sandbox environment and to relax such provisions of any existing Regulations framed by the Authority for a limited scope and limited duration, if such a relaxation is necessary during the experiment period.
3. Definitions:
(1) In these regulations, unless the context otherwise requires: –
a) “Act” means the Insurance Act, 1938:
b) “Applicant” includes
i. an insurer or
ii. an intermediary or insurance intermediary or
iii. any person other than an individual having a minimum net-worth as specified by the Competent Authority or
iv. any other person specified by the Competent Authority seeking singly or jointly permission for promoting innovation in insurance in India;
c) “Authority” means the Insurance Regulatory and Development Authority of India established under subsection (1) of Section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
d) “Competent Authority” means:
i. Chairperson, or
ii.such Whole-Time Member or such committee of the Whole-Time Members or such Officer(s) of the Authority, as may be determined by the Chairperson;
e) “Regulations” means the Regulations framed by the Authority as defined under Section 2 (16A) of the Act;
f) “Regulatory Sandbox” means an environment used in the financial services sector, which provides testing ground for new business models, processes and applications that may not necessarily be covered fully by or are not fully compliant with existing Regulations;
g) “Sandbox environment” means a testing environment designed for experimentation for a specific period of time.
(2) Words and expressions used and not defined in these Regulations but defined in the Insurance Act, 1938 (4 of 1938) or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) or the Rules or the Regulations notified there under, shall have the meanings respectively assigned to them in those Acts or the Rules or the Regulations as the case may be.
CHAPTER II
PROCEDURE FOR SEEKING PERMISSION FOR PROMOTING INNOVATION IN INSURANCE IN INDIA
4. Categories of application
An applicant may apply to the Competent Authority seeking permission for promoting or implementing innovation in insurance in India across the insurance value chain and in any area that requires relaxation of any provision of the Regulations, Notification, Master Circular, Guidelines, Circular or any other communication issued by the Authority, except for areas involving prudential and financial condition/stability matters, such as capital, liquidity, investment, solvency, reserving and such other areas as decided by the Authority from time to time.
5. Application for grant of permission for promoting innovation in insurance in India
(1) An applicant desiring to promote or implement innovation in insurance in India shall make an application to the Competent Authority electronically in the specified form.
(2) The application shall be accompanied by a non-refundable fee as specified.
(3) The Competent Authority may lay down such eligibility criteria, as it deems fit, for the applicants
(4) The Competent Authority may lay down the parameter for the experimentation stage of regulatory sandbox, liabilities and responsibilities of the applicant who is granted permission, as it deems fit.
6. Conditions for grant of permission
(1) The Competent Authority, on being satisfied that the applicant meets the eligibility criteria and other specified requirements, and that the application:
a. promotes innovation beneficial to insurance sector in India, and
b. is in the interest of the policyholders; or
c. is conducive for the orderly growth of the industry; or
d. would promote increase in insurance penetration in the country; or
e. bring in efficiency in insurance business; or
f. promotes ease of doing insurance business;
may grant permission subject to the applicant complying with the relevant provisions of the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999, Digital Personal Data Protection Act, 2023 and all other relevant statutes/regulation.
(2) The permission granted shall be valid for an experiment period as specified.
(3) The decision of the Competent Authority on matters relating to grant of permission shall be final.
7. Revocation of permission
The Competent Authority may revoke the permission so granted at any time, if it is of the view that the activities carried out are:
a. not meeting the conditions given in Regulation 6 above or
b. in violation of the provisions of the Insurance Act, 1938, the Insurance Regulatory and Development Authority Act, 1999 or other applicable laws.
Provided that before revoking the permission, the applicant shall be given an opportunity of being heard.
8. Extension of first permission
(1) If, at the end of experimental period, the applicant seeks extension of time, a request may be made to the Competent Authority citing the reasons for seeking the extension along with a performance analysis of the proposal so far.
(2) The Competent Authority may consider the request of the applicant on merits.
(3) Under no circumstances will the applicant be granted another extension of time beyond the time as specified.
(4) The clause relating to revocation of permission as mentioned in Regulation 7 shall apply mutatis mutandis for the extension period.
9. Internal monitoring, review and evaluation of systems and controls
(1) After grant of permission, the applicant shall ensure:
a. that the integrity of the systems is maintained at all times.
b. confidentiality of policyholder data is maintained.
c. adequate internal mechanisms are put in place for reviewing, monitoring and evaluating its controls, systems, procedures and safeguards.
(2) Where any deviation is noticed in executing the proposal, the applicant shall notify the same immediately to the Competent Authority.
(3) The applicant shall be liable for any liability for customer or business risks that may arise during the experimentation/test phase on entering the regulatory sandbox and the Authority shall not be responsible or liable for any such liability.
10. Review of proposal approved by the Competent Authority
(1) The Competent Authority, through the single point of contact (SPOC), shall review the progress of the proposal at regular intervals.
(2) The Competent Authority may also guide the applicant in the form of suggestions and in any other way as it may deem fit. However, the applicant shall be solely responsible for every action taken in respect of the proposal and shall be liable to discharge all the obligations thereunder including any legal obligations.
11. Conclusion of the proposal
(1) On completion of the allocated time period specified, the applicant shall submit a report to the Competent Authority within 30 days on how the proposal met the objectives along with feedback from the policyholders and such other information or details as specified. The applicant shall also submit a plan of action as to how the proposal be brought under the extant regulatory framework’.
(2) On examining the report of the applicant, if the Competent Authority is satisfied that the objectives of the proposal have been met, it may accord permission to the applicant to adopt the proposal under the extant regulatory framework wherein in addition to provisions of the Insurance Act, 1938, the Insurance Regulatory and Development Authority Act, 1999, all Regulations, guidelines, circulars, etc. will be applicable from the date of moving to the extant regulatory framework.
(3) On examining the report submitted by the applicant, if the Competent Authority is of the view that the objectives of the proposal are not met, the applicant may be directed to discontinue the proposal.
(4) An applicant may also request for early termination of the proposal in case it is felt by him that the proposal shall not be able to meet the desired objectives. Such request for early termination has to be submitted at least one month in advance. The Competent Authority shall consider the request on merits and advise the applicant accordingly subject to such conditions as it deems fit.
(5) On completion of the processes under the proposal, it shall be the duty of the applicant to erase all personal data of the participants and give a confirmation to that effect to the Competent Authority.
(6) The decision of the Competent Authority on whether or not to allow continuation of the proposal shall be final.
12. Inter-Regulatory Sandbox Proposals
The process and procedures in dealing with regulatory sandbox applications that cuts across more than one financial sector shall be as specified by the Competent Authority.
13. Power to Inspect, Investigate, etc.
The Competent Authority shall have the right to call for, inspect or investigate any document, record or communication from the applicant.
CHAPTER III
MISCELLANEOUS
14. Power of the Competent Authority to grant relaxation from the provisions of any Regulations to an applicant in the Regulatory Sandbox –
(1) The Competent Authority may relax for the applicant the applicability of one or more provisions of any Regulation(s) notified by the Authority or any guidelines or circulars issued by the Authority, subject to the conditions mentioned in Regulation 6 and any other conditions as deemed necessary. However, no relaxation shall be granted in respect of compliance with the Insurance Act, 1938 or Insurance Regulatory and Development Authority Act, 1999 or any other applicable statutes.
(2) Notwithstanding the above, where the Competent Authority is of the opinion that the operations of the applicant are not in the interest of the Indian insurance market or the insurance policyholders, the Competent Authority reserves the right to take all appropriate actions including suspension of the permission granted to the applicant.
15. Powers to issue Circular, Guidelines and directions from time to time
The Competent Authority may issue circulars, guidelines and directions, if necessary, from time to time, relating to these regulations, including operational issues pertaining to the implementation process of these regulations.
16. Power to issue clarifications and to remove difficulties, if any
In order to remove any doubts or the difficulties that may arise in the application or interpretation of any of the provisions of these regulations, the Competent Authority may issue appropriate clarifications as and when deemed necessary.
17. Repeal and Savings
(1) Insurance Regulatory and Development Authority of India (Regulatory Sandbox) Regulations, 2019 shall be repealed from the date these Regulations come into force.
(2) Unless otherwise provided by these regulations, anything done or any action taken or purported to have been done or taken in respect of the regulations mentioned in sub-regulation (1) above shall be deemed to have been done or taken under the corresponding provisions of these regulations.
DEBASISH PANDA, Chairperson
[ADVT.-III/4/Exty./878/2024-25]
