INDIA Law and Practice Contributed by: Neeraj Tuli, Celia Jenkins and Rajat Taimni, Tuli & Co
Regulatory Sandbox The IRDAI has notified the IRDAI (Regulatory Sandbox) Regulations 2025 (the “Sandbox Regulations”), which repeals the IRDAI (Regulatory Sandbox) Regulations 2019. The Sandbox Regulations are issued with an aim to promote innovation in the insurance sector while ensuring policyholder protection and orderly market growth. The Sandbox Regulations, inter alia, expand the scope of permissible innovations across the “insurance value chain” and any area where reg- ulatory relaxation is being sought, while continuing to exclude matters related to prudential and finan- cial stability, such as capital adequacy, liquidity, and solvency. Further, in relation to the timelines for the approval period and extension of an approval period, the Sandbox Regulations replace the fixed 36-month approval and 12-month extension under the erstwhile guidance with an ‘experiment period’ as specified by the IRDAI, beyond which no extension will be granted. 10.2 Regulatory Response The IRDAI has issued various norms to address tech- nological advancements and to regulate insurtech developments. The key regulatory changes are sum- marised as follows. • With the significant increase in e-commerce trans- actions in recent years, the IRDAI has recognised the sale and servicing of insurance products online as well as the issuance of e-insurance policies. The IRDAI introduced the IRDAI (Bima Sugam – Insur- ance Electronic Marketplace) Regulations 2024, with the vision of “insurance for all by 2047”. Bima Sugam is an e-commerce platform that will act as a centralised hub, aggregating offerings from various insurance companies. It aims to provide a seamless and end-to-end digital experience for buyers of insurance products. The IRDAI initiative will compete with current insurance e-commerce platforms and shows the transformative power of technology in the insurance industry. • The IRDAI’s Information and Cybersecurity Guide- lines 2023 of 24 April 2023 sets out certain norms in relation to the collection of data and the usage of policyholders’ data both by the insurers and insur- ance intermediaries involved, as well as by any third-party service providers engaged by them.
• The IRDAI’s Master Guidelines on Anti-Money Laundering/Counter-Financing of Terrorism (AML/ CFT) 2022 provide for a video-based identification process (VBIP) as one of the methods for insur- ers to perform mandatory KYC processes for their customers. • The IRDAI issued its circular of 14 November 2022 on Participation in Account Aggregator Framework in order to provide guidance on the participation of Indian insurance companies and insurance reposi- tories (ie, National Securities Depository Limited (NSDL), Central Depository Services Limited (CDSL), Karvy and Computer Age Management Services (CAMS)) in the RBI’s account aggregator framework. In addition, the IRDAI issued a circular on Participation in the Account Aggregator (AA) Framework as a Financial Information User on 3 November 2023, which sets out certain require- ments that must be complied with by entities registered with the IRDAI. • The IRDAI has set a limit on the maximum expens- es that are permitted to be incurred by an Indian insurance company and set out an additional limit on expenses that are permitted for insurtech. 11. Emerging Risks and New Products 11.1 Emerging Risks Affecting the Insurance Market A growing number of cyber-insurance covers have been issued and a growing number of claims have been made under them. This has also led to an increased need for forensic expert analysis for the purposes of assessment of coverage under such poli- cies. This trend is likely to continue given the growing cyber risks. However, as cybercovers are compara- tively recent in this jurisdiction, there has yet to be any litigation involving cyberpolicies. Further, the IRDAI has strongly encouraged insurers to implement robust IT security frameworks and to check their systems for vulnerabilities in order to pre- vent data leaks and protect policyholders’ data. 11.2 New Products or Alternative Solutions The Indian insurance industry has seen a wave of new insurance products, partly due to regulatory and/or
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