The Insurance Regulatory and Development Authority (IRDAI) recently issued the IRDAI (Regulatory Sandbox) Regulations 2019 (Regulatory Sandbox Regulations), which aim to facilitate the creation of a regulatory sandbox environment in which to test new business models, processes, proposals and applications in order to strike a balance between the orderly development of the insurance sector and the protection of policyholders' interests (for further details, please see "Regulatory sandbox proposed for insurance sector"). In addition, on 22 August 2019 the IRDAI issued the Guidelines on Operational Issues Pertaining to the Regulatory Sandbox.

What is a regulatory sandbox?

A 'regulatory sandbox' is a testing environment in which to analyse new business models, processes, applications and proposals that may not be expressly compliant with existing statutory and regulatory insurance framework.


The Regulatory Sandbox Regulations stipulate that the following entities can apply to the IRDAI for permission to promote or implement innovation in the Indian insurance industry under the regulatory sandbox framework:

  • insurers;
  • insurance intermediaries;
  • any person, other than an individual, who had a net worth of Rs1 million in the previous financial year; or
  • any other person recognised by the IRDAI.

Application process

Applications can be submitted via FORM–RG-1 (included in the regulations) for one or more of the following categories:

  • insurance solicitation or distribution;
  • insurance products;
  • underwriting;
  • policy and claims servicing; or
  • any other category recognised by the IRDAI.

If an applicant is not an insurer and wishes to apply under the underwriting and/or insurance products category, they must file an application in association with an insurer.

Conditions for obtaining permission

The IRDAI chair will grant applicants permission to operate under the regulatory sandbox framework provided that they satisfy the following conditions:

  • the application promotes innovation, which is beneficial to the Indian insurance market;
  • the application is in the interest of policyholders;
  • the application is conducive to the industry's orderly growth;
  • the application promotes an increase in insurance penetration in India; and
  • the application meets any other requirements specified by the IRDAI.

Further, applicants must demonstrate to the IRDAI that their application pertains to a genuine innovation and is not merely an attempt to benefit from a relaxed regulatory environment.

Relaxation of regulations

On approval of an application, the IRDAI chair may relax the applicability of one or more provisions of any regulations, guidelines or circulars requested in the application, subject to the conditions for approving the application or any other conditions which the chair deems necessary. The Regulatory Sandbox Regulations expressly state that no relaxation will be granted in relation to the Insurance Act 1938 or the Insurance Regulatory and Development Authority (IRDA) Act 1999.

Validity of applications

The IRDAI will grant successful applicants permission to operate under the regulatory sandbox for six months. Applicants may apply for one extension, provided that:

  • a request – citing the reasons for the extension – is submitted to the IRDAI along with a performance report concerning the initial six-month period; and
  • the extension sought is for no more than six months.

Revocation of permission

The IRDAI chair may revoke the permission granted to an applicant if its activities do not comply with the conditions for granting an application or violate the Insurance Act, the IRDA Act or any other applicable law.

Conclusion of applications

An application will conclude if any of the following conditions are met:

  • the number of customers exceeds 10,000;
  • the total collection of premiums exceeds Rs5 million; or
  • any other parameter decided by the IRDAI is met.

Once an application is completed, the relevant product will be considered to have completed the testing phase. Within 15 days of the completion date, the applicant must submit a report to the IRDAI setting out how the application meets the objectives, along with feedback from the participants and any information as specified by the IRDAI.

The IRDAI will review the report and:

  • permit the applicant to adopt the application under the existing applicable statutory and regulatory insurance framework (without any relaxations); or
  • direct the applicant to discontinue the application.

Migration of services and insurance products

On successful completion of an application, the applicant must offer the services or insurance products to the public on a regular basis in the market. If the applicant discontinues the services or insurance products, they must honour the existing liabilities as stipulated in the relevant terms and conditions.

Single point of contact

All communications to the IRDAI must be routed through the single point of contact, which is appointed by the IRDAI to provide guidance to applicants on issues pertaining to the regulatory sandbox environment. Deputy General Manager (Distribution Development) Sanjay Verma is the current single point of contact.


Market players must file applications under the regulatory sandbox framework in the prescribed format between 15 September 2019 and 14 October 2019. If an applicant experiences any issues in this regard, they should contact the single point of contact (

Although insurance players are calling the sandbox a game changer, it remains to be seen how much it will be used and whether customers will opt to purchase innovative products.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.