As the country continues to combat the negative economic impacts of COVID-19, states are exploring ways to invite businesses to their states while spurring economic recovery by tackling government overregulation. North Carolina — a prime example — just signed into law a regulatory sandbox targeting the insurance and financial technologies (fintech) industries.
A regulatory sandbox allows for businesses, under the observation of regulators, to develop and offer new products, services, and business models while bypassing regulations unsuited for their innovative ideas.
This year, Representative Jason Saine proposed a regulatory sandbox for insurance and fintech products, as well as services. The sandbox created by House Bill 624 will present companies with an opportunity to offer their unique goods and services on the market that otherwise wouldn’t be allowed under the current regulations in place.
- Allows a company to offer its products or services in a controlled environment indefinitely;
- Requires that the company remain transparent to the consumer in an effort to inform them of the services they are exploring;
- Provides controls for entry and exit from the sandbox so consumers aren’t left high and dry;
- Establishes the eleven-member North Carolina Innovation Council, which sets guidelines for the participants, as well as grants or denies entrance into the sandbox.
If the trial is a success, the sandbox offers a path forward for the company to enter the open market while also providing guidance to the Innovation Council on which regulations require reform or even repeal.
The sandbox benefits both new and existing enterprises. By providing businesses — both big and small — the opportunity to innovate in the fintech and insurance spaces, it’ll be interesting to see what “next big thing” will come as a result of North Carolina’s new sandbox.
North Carolina’s John Locke Foundation proved instrumental in ushering House Bill 624 through their state legislature before receiving Governor Roy Cooper’s signature. North Carolina now joins several other states that have created industry-specific sandboxes, helping innovative businesses avoid problematic and outdated regulations.
These industry-specific sandboxes are a great way to help policymakers learn about this new regulatory model and how it can protect innovation — ideally not just in one or two industries, but for the benefit of all businesses and their consumers. For example, Utah started with a sandbox for the fintech industry and recently established the country’s first all-inclusive sandbox. North Carolina is following a similar path forward.
Regulatory sandboxes are an issue that Libertas Institute has researched extensively, and we stand ready to help your state pursue this opportunity as we have with North Carolina. For groups or legislators in other states looking to work on the issue, we’d love to help!