Vermont's governor, Phil Scott, has signed S.131, relating to the creation of an insurance “regulatory sandbox” that permits the financial regulation commissioner to grant limited-duration innovation waivers.
The waivers are designed to enable companies to offer innovative or more efficient insurance products and services to Vermont consumers.
“This program will show insurers and the businesses and individuals they serve that Vermont is open to innovation,” said Governor Scott. “We hope this program will allow insurers the opportunity to bring to market new types of products that provide significant benefits to Vermont consumers and our economy.”
The program allows the commissioner to waive, for a specific time period, a limited set of statutory and regulatory requirements that might otherwise inhibit new and innovative products or services.
Innovation waivers may be granted if a company demonstrates a waiver is in the public interest and will not substantially increase risk to consumers. Additional robust consumer protections are included in the law.
According to the commissioner, Michael Pieciak, “Although companies may be granted temporary relief from certain statutory or regulatory requirements under this program, they will also be subject to enhanced regulatory oversight during the waiver period.”
Innovation waivers are temporary; at the end of a waiver period, a company must cease offering the product or service and comply with all applicable laws and regulations.
The deputy insurance commissioner, Kevin Gaffney, said, “If a product completes a successful test under a waiver, the department could determine that statutory change is warranted and propose appropriate legislation to allow the insurance product or service to be offered on a permanent basis.”
The financial regulation department said that it anticipated that it will begin accepting applications for innovation waivers by the end of 2019 once the operative regulations are adopted.
Alison Cooper, the vice president of the northeast region of the American Property Casualty Insurance Association (“APCIA”), said in a statement, “We commend the governor, Commissioner Pieciak, and state lawmakers for their leadership and actions to encourage innovation within the state's insurance marketplace, which will help to deliver new financial services products to businesses and consumers. The regulatory sandbox concept provides the best of two worlds. It creates a climate where new and innovative ideas can be tested in the marketplace, while ensuring that consumer protections are not compromised. It also ensures that a level playing field is maintained for insurers both inside and outside of the sandbox.
“This new law enables insurers and regulators to create an environment for the pilot testing of new and innovative ways to deliver financial services products to business and consumers, which could include, for example, new ways to improve the claims process or other techniques to increase efficiencies and improve overall customer satisfaction,” Ms. Cooper added.
The new law also contained several surplus lines related provisions including the authorization of domestic surplus lines insurers, repealing SLIMPACT, and standardizing the premium tax rate for multistate risks.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].