1     
REGULATORY WAIVER PROCESS

2     
2020 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Adam Robertson

5     
Senate Sponsor: Lincoln Fillmore

6     Cosponsors:
7     Jon Hawkins
Marc K. Roberts


8     

9     LONG TITLE
10     General Description:
11          This bill modifies provisions related to the Department of Insurance.
12     Highlighted Provisions:
13          This bill:
14          ▸     defines terms;
15          ▸     creates an insurance regulatory sandbox program in the Department of Insurance,
16     which allows a participant to temporarily test innovative insurance products or
17     services on a limited basis without otherwise being licensed or authorized to act
18     under the laws of the state;
19          ▸     describes the application process and the conditions of participating in the program;
20          ▸     describes the responsibilities of the Department of Insurance in administering the
21     program; and
22          ▸     describes reporting requirements for participants in the program and for the
23     Department of Insurance.
24     Money Appropriated in this Bill:
25          None
26     Other Special Clauses:
27          None
28     Utah Code Sections Affected:

29     ENACTS:
30          31A-47-101, Utah Code Annotated 1953
31          31A-47-102, Utah Code Annotated 1953
32          31A-47-103, Utah Code Annotated 1953
33          31A-47-104, Utah Code Annotated 1953
34          31A-47-105, Utah Code Annotated 1953
35          31A-47-106, Utah Code Annotated 1953
36          31A-47-107, Utah Code Annotated 1953
37          31A-47-108, Utah Code Annotated 1953
38     

39     Be it enacted by the Legislature of the state of Utah:
40          Section 1. Section 31A-47-101 is enacted to read:
41     
CHAPTER 47. INSURANCE REGULATORY SANDBOX PROGRAM

42          31A-47-101. Title.
43          This chapter is known as the "Insurance Regulatory Sandbox Program."
44          Section 2. Section 31A-47-102 is enacted to read:
45          31A-47-102. Definitions.
46          As used in this chapter:
47          (1) "Applicable agency" means a department or agency of the state, including the
48     department and the Department of Commerce, that by law regulates certain types of
49     insurance-related business activity in the state and persons engaged in such insurance-related
50     business activity, including the issuance of licenses or other types of authorization, which the
51     department determines would otherwise regulate an insurance sandbox participant.
52          (2) "Applicant" means an individual or entity that is applying to participate in the
53     insurance regulatory sandbox.
54          (3) "Blockchain technology" means the use of a digital database containing records of
55     financial transactions, which can be simultaneously used and shared within a decentralized,
56     publicly accessible network and can record transactions between two parties in a verifiable and

57     permanent way.
58          (4) "Consumer" means a person that purchases or otherwise enters into a transaction or
59     agreement to receive an innovative insurance product or service that is being tested by an
60     insurance sandbox participant.
61          (5) "Department" means the Department of Insurance.
62          (6) "Innovation" means the use or incorporation of a new or emerging technology or a
63     new use of existing technology, including blockchain technology, to address a problem,
64     provide a benefit, or otherwise offer a product, service, business model, or delivery mechanism
65     that is not known by the department to have a comparable widespread offering in the state.
66          (7) "Innovative insurance product or service" means an insurance product or service
67     that includes an innovation.
68          (8) (a) "Insurance product or service" means an insurance product or insurance service
69     that requires state licensure, registration, or other authorization as regulated by Title 31A,
70     Insurance Code, including an insurance product or insurance service that includes a business
71     model, delivery mechanism, or element that requires a license, registration, or other
72     authorization to do an insurance business, act as an insurance producer or consultant, or engage
73     in insurance adjusting as regulated by Title 31A, Insurance Code.
74          (b) "Insurance product or service" does not include a product or service that is
75     governed by Title 61, Chapter 1, Utah Uniform Securities Act.
76          (9) "Insurance regulatory sandbox" means the Insurance Regulatory Sandbox Program
77     created by Section 31A-47-103, which allows a person to temporarily test an innovative
78     insurance product or service on a limited basis without otherwise being licensed or authorized
79     to act under the laws of the state.
80          (10) "Insurance sandbox participant" means a person whose application to participate
81     in the insurance regulatory sandbox is approved in accordance with the provisions of this
82     chapter.
83          (11) "Test" means to provide an innovative insurance product or service in accordance
84     with the provisions of this chapter.

85          Section 3. Section 31A-47-103 is enacted to read:
86          31A-47-103. Insurance Regulatory Sandbox Program -- Application
87     requirements.
88          (1) There is created in the department the Insurance Regulatory Sandbox Program.
89          (2) In administering the insurance regulatory sandbox, the department:
90          (a) shall consult with each applicable agency;
91          (b) shall establish a program to enable a person to obtain limited access to the market
92     in the state to test an innovative insurance product or service without obtaining a license or
93     other authorization that might otherwise be required;
94          (c) may enter into agreements with or follow the best practices of the Consumer
95     Financial Protection Bureau or other states that are administering similar programs; and
96          (d) may not approve participation in the insurance regulatory sandbox program by an
97     applicant or any other participant who has been convicted, entered a plea of nolo contendere, or
98     entered a plea of guilty or nolo contendere held in abeyance, for a crime:
99          (i) involving theft, fraud, or dishonesty; or
100          (ii) that bears a substantial relationship to the applicant's or participant's ability to
101     safely or competently participate in the insurance regulatory sandbox program.
102          (3) An applicant for the insurance regulatory sandbox shall provide to the department
103     an application in a form prescribed by the department that:
104          (a) includes a nonrefundable application fee of $4,500, which fee may be waived or
105     reduced by the department if the applicant holds a license issued by the department under the
106     provisions of Title 31A, Insurance Code;
107          (b) demonstrates the applicant is subject to the jurisdiction of the state;
108          (c) demonstrates the applicant has established a physical or virtual location that is
109     adequately accessible to the department, from which testing will be developed and performed
110     and where all required records, documents, and data will be maintained;
111          (d) contains relevant personal and contact information for the applicant, including legal
112     names, addresses, telephone numbers, email addresses, website addresses, and other

113     information required by the department;
114          (e) discloses criminal convictions of the applicant or other participating personnel, if
115     any;
116          (f) demonstrates that the applicant has the necessary personnel, financial and technical
117     expertise, access to capital, and developed plan to test, monitor, and assess the innovative
118     insurance product or service;
119          (g) contains a description of the innovative insurance product or service to be tested,
120     including statements regarding all of the following:
121          (i) how the innovative insurance product or service is subject to licensing or other
122     authorization requirements outside of the insurance regulatory sandbox, including a specific list
123     of all state laws, regulations, and licensing or other requirements that the applicant is seeking to
124     have waived during the testing period;
125          (ii) how the innovative insurance product or service would benefit consumers;
126          (iii) how the innovative insurance product or service is different from other insurance
127     products or services available in the state;
128          (iv) what risks may confront consumers that use or purchase the innovative insurance
129     product or service;
130          (v) how participating in the insurance regulatory sandbox would enable a successful
131     test of the innovative insurance product or service;
132          (vi) a description of the proposed testing plan, including estimated time periods for
133     beginning the test, ending the test, and obtaining necessary licensure or authorizations after the
134     testing is complete;
135          (vii) a description of how the applicant will perform ongoing duties after the test; and
136          (viii) how the applicant will end the test and protect consumers if the test fails,
137     including providing evidence of sufficient liability coverage and financial reserves to protect
138     consumers and to protect against insolvency by the applicant; and
139          (h) provides any other required information as determined by the department.
140          (4) An applicant shall file a separate application for each innovative insurance product

141     or service that the applicant wants to test.
142          (5) After an application is filed and before approving an application, the department
143     may seek any additional information from the applicant and from the department's own
144     research that the department determines is necessary, including:
145          (a) proof of sufficient assets, accounts, liability coverage, surety bond coverage, or
146     other preparation by the applicant to ensure that consumers are protected and that the applicant
147     will be able to cover ongoing duties when the test ends or if the test ends early; and
148          (b) industry ratings and past performance of the applicant.
149          (6) Subject to Subsection (7), not later than 90 days after the day on which a complete
150     application is received by the department, the department shall inform the applicant as to
151     whether the application is approved for entry into the insurance regulatory sandbox.
152          (7) The department and an applicant may mutually agree to extend the 90-day time
153     period described in Subsection (6) for the department to determine whether an application is
154     approved for entry into the insurance regulatory sandbox.
155          (8) (a) In reviewing an application under this section, the department shall consult
156     with, and get approval from, each applicable agency before admitting an applicant into the
157     insurance regulatory sandbox.
158          (b) The consultation with an applicable agency may include seeking information about
159     whether:
160          (i) the applicable agency has previously issued a license or other authorization to the
161     applicant;
162          (ii) the applicable agency has previously investigated, sanctioned, or pursued legal
163     action against the applicant;
164          (iii) whether the applicant could obtain a license or other authorization from the
165     applicable agency after exiting the insurance regulatory sandbox; and
166          (iv) whether certain licensure or other regulations should not be waived even if the
167     applicant is accepted into the insurance regulatory sandbox.
168          (9) In reviewing an application under this section, the department shall consider

169     whether a competitor to the applicant is or has been an insurance sandbox participant and, if so,
170     weigh that as a factor in favor of allowing the applicant to also become an insurance sandbox
171     participant.
172          (10) If the department and each applicable agency approve admitting an applicant into
173     the insurance regulatory sandbox an applicant may become an insurance sandbox participant.
174          (11) The department may deny any application submitted under this section, for any
175     reason, at the department's discretion.
176          (12) If the department denies an application submitted under this section, the
177     department shall provide to the applicant a written description of the reasons for the denial as
178     an insurance sandbox participant.
179          Section 4. Section 31A-47-104 is enacted to read:
180          31A-47-104. Scope of the insurance regulatory sandbox.
181          (1) If the department approves an application under Section 31A-47-103, the insurance
182     sandbox participant has 12 months after the day on which the application was approved to test
183     the innovative insurance product or service described in the insurance sandbox participant's
184     application.
185          (2) An insurance sandbox participant testing an innovative insurance product or service
186     within the insurance regulatory sandbox is subject to the following:
187          (a) consumers shall be residents of the state;
188          (b) the department may, on a case by case basis, specify the maximum number of
189     consumers that may enter into an agreement with the insurance sandbox participant to use the
190     innovative insurance product or service;
191          (c) the department may, if applicable and on a case by case basis, specify the maximum
192     number of items and the maximum coverage amount for each item that may be offered by an
193     insurance sandbox participant during the testing of the innovative insurance product or service;
194     and
195          (d) the department may, on a case by case basis, specify liability coverage requirements
196     and minimum financial reserves requirements that the insurance sandbox participant shall meet

197     during the testing of the innovative insurance product or service.
198          (3) This section does not restrict an insurance sandbox participant who holds a license
199     or other authorization in another jurisdiction from acting in accordance with that license or
200     other authorization.
201          (4) An insurance sandbox participant is deemed to possess an appropriate license under
202     the laws of the state for the purposes of any provision of federal law requiring state licensure or
203     authorization.
204          (5) An insurance sandbox participant that is testing an innovative insurance product or
205     service is not subject to state laws, regulations, licensing requirements, or authorization
206     requirements that were identified by the insurance sandbox participant in the insurance
207     sandbox participant's application and have been waived in writing by the department.     
208          (6) Notwithstanding any other provision of this chapter, an insurance sandbox
209     participant does not have immunity related to any criminal offense committed during the
210     insurance sandbox participant's participation in the insurance regulatory sandbox.
211          (7) By written notice, the department may end an insurance sandbox participant's
212     participation in the insurance regulatory sandbox at any time and for any reason, including if
213     the department determines an insurance sandbox participant is not operating in good faith to
214     bring an innovative insurance product or service to market.
215          (8) The department and the department's employees are not liable for any business
216     losses or the recouping of application expenses related to the insurance regulatory sandbox,
217     including for:
218          (a) denying an applicant's application to participate in the insurance regulatory sandbox
219     for any reason; or
220          (b) ending an insurance sandbox participant's participation in the insurance regulatory
221     sandbox at any time and for any reason.
222          (9) No guaranty association in the state may be held liable for business losses or
223     liabilities incurred as a result of activities undertaken by a participant in the insurance sandbox.
224          Section 5. Section 31A-47-105 is enacted to read:

225          31A-47-105. Consumer protection for insurance regulatory sandbox.
226          (1) Before providing an innovative insurance product or service to a consumer, an
227     insurance sandbox participant shall disclose the following to the consumer:
228          (a) the name and contact information of the insurance sandbox participant;
229          (b) that the innovative insurance product or service is authorized pursuant to the
230     insurance regulatory sandbox and, if applicable, that the insurance sandbox participant does not
231     have a license or other authorization to provide an insurance product or service under state laws
232     that regulate insurance products or services outside the insurance regulatory sandbox;
233          (c) that the innovative insurance product or service is undergoing testing and may not
234     function as intended and may expose the customer to financial risk;
235          (d) that the provider of the innovative insurance product or service is not immune from
236     civil liability for any losses or damages caused by the innovative insurance product or service;
237          (e) that the state does not endorse or recommend the innovative insurance product or
238     service;
239          (f) that the innovative insurance product or service is a temporary test that may be
240     discontinued at the end of the testing period;
241          (g) the expected end date of the testing period; and
242          (h) that a consumer may contact the department to file a complaint regarding the
243     innovative insurance product or service being tested and provide the department's telephone
244     number and website address where a complaint may be filed.
245          (2) The disclosures required by Subsection (1) shall be provided to a consumer in a
246     clear and conspicuous form and, for an Internet or application-based innovative insurance
247     product or service, a consumer shall acknowledge receipt of the disclosure before a transaction
248     may be completed.
249          (3) The department may require that an insurance sandbox participant make additional
250     disclosures to a consumer.
251          Section 6. Section 31A-47-106 is enacted to read:
252          31A-47-106. Requirements for exiting insurance regulatory sandbox.

253          (1) At least 30 days before the end of the 12-month insurance regulatory sandbox
254     testing period, an insurance sandbox participant shall:
255          (a) notify the department that the insurance sandbox participant will exit the insurance
256     regulatory sandbox, discontinue the insurance sandbox participant's test, and will stop offering
257     any innovative insurance product or service in the insurance regulatory sandbox within 60 days
258     after the day on which the 12-month testing period ends; or
259          (b) seek an extension in accordance with Section 31A-47-107.
260          (2) Subject to Subsection (3), if the department does not receive notification as
261     required by Subsection (1), the insurance regulatory sandbox testing period ends at the end of
262     the 12-month testing period and the insurance sandbox participant shall immediately stop
263     offering each innovative insurance product or service being tested.
264          (3) If a test includes offering an innovative insurance product or service that requires
265     ongoing duties, the insurance sandbox participant shall continue to fulfill those duties or
266     arrange for another person to fulfill those duties after the date on which the insurance sandbox
267     participant exits the insurance regulatory sandbox.
268          Section 7. Section 31A-47-107 is enacted to read:
269          31A-47-107. Extensions.
270          (1) Not later than 30 days before the end of the 12-month regulatory insurance sandbox
271     testing period, an insurance sandbox participant may request an extension of the insurance
272     regulatory sandbox testing period for the purpose of obtaining a license or other authorization
273     required by law.
274          (2) The department shall grant or deny a request for an extension in accordance with
275     Subsection (1) by the end of the 12-month insurance regulatory sandbox testing period.
276          (3) The department may grant an extension in accordance with this section for not
277     more than six months after the end of the insurance regulatory sandbox testing period.
278          (4) An insurance sandbox participant that obtains an extension in accordance with this
279     section shall provide the department with a written report every three months that provides an
280     update on efforts to obtain a license or other authorization required by law, including any

281     submitted applications for licensure or other authorization, rejected applications, or issued
282     licenses or other authorization.
283          Section 8. Section 31A-47-108 is enacted to read:
284          31A-47-108. Record keeping and reporting requirements.
285          (1) An insurance sandbox participant shall retain records, documents, and data
286     produced in the ordinary course of business regarding an innovative insurance product or
287     service tested in the insurance regulatory sandbox.
288          (2) If an innovative insurance product or service fails before the end of a testing period,
289     the insurance sandbox participant shall notify the department and report on actions taken by the
290     insurance sandbox participant to ensure consumers have not been harmed as a result of the
291     failure.
292          (3) The department shall establish quarterly reporting requirements for an insurance
293     sandbox participant, including information about any customer complaints.
294          (4) The department may request records, documents, and data from an insurance
295     sandbox participant and, upon the department's request, an insurance sandbox participant shall
296     make such records, documents, and data available for inspection by the department.
297          (5) If the department determines that an insurance sandbox participant has engaged in,
298     is engaging in, or is about to engage in any practice or transaction that is in violation of this
299     chapter or that constitutes a violation of a state or federal criminal law, the department may
300     remove an insurance sandbox participant from the insurance regulatory sandbox.
301          (6) By October 1, the department shall provide an annual written report to the Business
302     and Labor Interim Committee that provides information regarding each insurance sandbox
303     participant and that provides recommendations regarding the effectiveness of the Insurance
304     Regulatory Sandbox Program.