CEM REPORT, FINANCE | The National Insurance Commission (NAICOM), has released a new set of operational guidelines to guide the conduct of the sector.
The regulation, which became effective on May 1, 2023, seeks to set standards for live trials or demonstrations of new innovative products in the industry.
According to a circular released at the weekend by the Head of Corporate Communication and Market Development, Rasaaq Salami, the new guidelines will ensure that operators act professionally and conduct business operations in line with best practices.
He added that the “Insurance Regulatory Sandbox Operational Guidelines” also aspire to give insurance institutions, other businesses, and individuals the chance to test business models, products, and services that will increase efficiency in satisfying consumer needs; to promote innovation that will drive financial inclusion and healthy competition; and to deliver economic benefits by reducing the cost of business operations.
He noted that the possible areas of innovation that will be allowed into the Regulatory Sandbox are as follows: distribution, insurance product innovation, policy and claims servicing.
Other areas covered by Insurance Regulatory Sandbox Regulatory Guidelines, are market conduct guidelines for Takaful, Retakaful insurance operators, and enterprise risk management framework for Takaful.
Additionally, NAICOM stated that a candidate would be qualified for the sandbox if they could meet the requirements, which include having the capacity to show the potential to promote inclusive insurance.
Explaining the circular noted that the framework required applicants to have a minimum professional indemnity of N500 million among other regulatory requirements.
Essentially, professional indemnity insurance protects the operator against claims for loss or damage made by clients or third parties as a result of the impact of service negligence or negligent advice offered – and claims can be made against a service provider even if offered for free.
The insurance industry regulator also stated that it will accept applications from four categories of applicants including insurers, insurance brokers, loss adjusters and any other applicant as the commission deems fit.
The commission further stated that in order to deploy their services in the sandbox, financial and insurance technology businesses must cooperate with or apply through any of the aforementioned applicant groups.
Adding that such application shall be accompanied by a Service Level Agreement which will be subject to the commission’s approval.