Limited and Open Government

West Virginia: Innovating in the Insurance Industry

As the country recovers from the economic fallout of COVID-19, states are exploring ways to boost recovery, such as tackling overregulation. West Virginia, for example, recently created a “regulatory sandbox” targeting the insurance industry.

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 idea. 

This year, Delegate Steve Westfall proposed a regulatory sandbox for insurance products and services. The sandbox created by House Bill 2221 will present companies with an opportunity to offer their unique goods and services in the marketplace that otherwise wouldn’t be allowed under the current regulations in place. 

The sandbox: 

  • Allows a company to offer its products or services in a controlled environment for up to three years.
  • Requires the company to 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. 

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 insurance department on which regulations require reform or even repeal. 

This sandbox doesn’t just benefit new companies, but also existing ones. By providing businesses — both big and small — the opportunity to innovate in the insurance space, it’ll be interesting to see what “next big thing” will come as a result of West Virginia’s insurance sandbox. 

West Virginia’s Cardinal Institute proved instrumental in ushering House Bill 2221 through their state legislature before receiving Governor Jim Justice’s signature. West Virginia now joins several other states that have created industry-specific sandboxes, helping innovative businesses avoid problematic or outdated regulations.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 financial technology and insurance industries, and just created the country’s first all-inclusive sandbox. West Virginia is following this same path forward.  

Regulatory sandboxes are an issue Libertas Institute has researched extensively, and we stand ready to help your state pursue this reform opportunity as we have with West Virginia. For groups or legislators in other states looking to work on the issue, we’d love to help!