. Nepal Rastra Bank (NRB) has introduced the concept of ‘Fintech Regulatory Sandbox’ for the supervision of digital wallets.
Through this concept, the NRB intends to implement regulatory supervision through experimentation, testing and improvement in the regulatory supervision of financial service provider digital wallet companies.TAG_OPEN_p_15 “Regulatory sandbox” or “sandbox” refers to a controlled and supervised use environment. Participating organizations may test their products, services or solutions under defined criteria and subject to the terms and limitations of these guidelines.
This concept facilitates the implementation of theoretical or paper services or regulations under regulatory control in a practical way through innovation. Based on this, both the regulator and the service provider will continue the trial if it is successful. If the test fails or fails, the cause is identified and addressed.
The Insurance Authority of Nepal (IA) has also pointed out the need to implement the concept of ‘regulatory sandbox’ in the insurance sector of Nepal.TAG_OPEN_p_13 Currently, the authority is giving priority to the promotion of key regulatory systems for the insurance sector such as risk-based supervision, risk-based capital, solvency directive, and issuance of non-physical policies. Along with the implementation of these regulatory provisions, it would be appropriate for the authority to implement the concept of regulatory sandbox for innovation in the insurance sector.
According to Rajendra Maharjan, deputy director of the authority, insurers, intermediaries and startups can use innovative insurance solutions once the regulatory sandbox is implemented in the insurance sector.TAG_OPEN_p_12 “In such a situation, the regulatory provisions are temporarily facilitated,” he said.
Maharjan said that the Niyam sandbox is being practiced in the international insurance market.TAG_OPEN_p_11 “I think we should implement it now,” he said.
In Nepal, the Insurance Regulatory Sandbox will provide approval to insurers, information technology-based insurance service providers (in the current context, digital wallets, insurance aggregators) etc. to conduct control and test innovating, innovative products, risk indicator identification, claim processing process, new risk framework, non-physical distribution system (through mobile apps), parametric (based on seasonal indices) insurance, test-based insurance plans.TAG_OPEN_p_10 Maybe.
In neighboring India, the insurance regulator has adopted a policy to encourage innovation in insurance schemes.TAG_OPEN_p_9 The provision, which came into effect this year, allows insurers to use and sell new insurance plans without the prior approval of the regulator. The facility of informing the regulator only after the sale has paved the way for the insurer to bring the innovative insurance scheme into sale in a short time.
Although the regulator is said to encourage innovation at the policy level, the challenges of ensuring the protection of insured interests should be addressed. Insurance includes a promise to depend on uncertain future events. Applying the concept of a regulatory sandbox for innovation involves the challenges of addressing regulatory risks, financial stability, data privacy, fraud risks, and fairness in services. Against such a backdrop, it should be ensured that innovations do not undermine these overall issues.
