Innovators to capitalize on expanded exemptions in 2018
In the coming year, the Australian Securities and Investments Commission (ASIC) will actively encourage insurtech start-ups to enter Australia's regulatory sandbox and make use of a world-first licensing exemption which applies a "lighter touch" regulatory environment.
The ASIC licensing exemption allows eligible insurtech businesses to test certain specified services for up to 12 months without an Australian Financial Services License (AFSL). However, the exemption is currently only available to insurtech businesses which advise on, or distribute personal property and home and contents general insurance products with a maximum insured value of AUD50,000. Consequently, over the last 12 months, very few insurtech start-ups have elected to take advantage of the ASIC regulatory sandbox.
The Treasury has recently released draft legislation and regulations proposing reforms to expand the scope of the regulatory sandbox exemptions, and extending the exemption period from 12 months to 24 months. These changes are expected to take effect in 2018.
All general insurance and life insurance products will now potentially be eligible for the sandbox. With the expansion, such products can be dealt with in the sandbox where the sum insured is less than AUD85,000 for general insurance products and less than AUD300,000 for life insurance products.
With a new industry body, Insurtech Australia, recently launched, pressure will mount for the Australian Government to further liberalise the regulatory regime to take account of the unique characteristics of insurtech start-ups.
As insurtech start-ups achieve a better understanding of the benefits of the regulatory sandbox, we expect more companies to take advantage of this option.
You can read the rest of our insurance predictions here.