Insurtechs Hope NC Sandbox Will Ease Regulations for Innovations

November 15, 2021 by

Until now, it has been practically verboten for insurers in many states to offer policyholders a free fitness tracker, such as a FitBit, or even wearable sniffers for factory workers to help detect toxic gases.

The 50-year-old anti-inducement laws were designed to prevent unfair trade practices that might give one insurer an advantage over another. But insurtech advocates say those types of rules are out of date and are holding back innovations in the marketplace. Now, thanks to what’s being called a “regulatory sandbox” in North Carolina and other states, insurance firms and their insurtech brethren can offer wearable technology and much more without running afoul of aging regulations – at least on a temporary basis.

The sandbox approach “provides an opportunity for the regulatory system to be more proactively aware of trends and opportunities across the entire technology universe and more nimble in capitalizing on them,” said Tariq Bokhari, a Charlotte city councilman and executive director of the Carolina Fintech Hub.

The fintech community was a driving force behind passage of North Carolina’s sandbox legislation, House Bill 624. The measure passed both houses unanimously and was signed into law in October, making the Tar Heel State the 11th state to adopt some type of regulatory sandbox. Others include Florida, Kentucky, West Virginia, Vermont, South Dakota, Wyoming, Arizona, Utah, Nevada and Hawaii.

Under the North Carolina approach, startups and other companies may apply to a special innovation council. If deemed worthy, the company will see some regulations waived for a period of two years, allowing firms to experiment with new ideas that might otherwise die in the cradle.

The sandbox can eliminate arcane licensing and product rules that may prevent innovations from readily coming to market, supporters said.

The idea has been heavily promoted by libertarian groups, including the Libertas Institute and the John Locke Foundation. And some consumer groups have expressed concerns about waiving regulations that are designed to protect people and small businesses. But advocates insist that consumer protections are built into the sandbox, and consumers will win in the end.