Cut red tape with a regulatory sandbox
It’s not easy to be an innovative business in Montana. As of the last count, Montana maintains the second highest burden of regulations per capita in our region, targeting businesses with thousands of pages of complicated and often unnecessary red tape. Worse yet, many of these regulations were created decades ago and aren’t built to fit the emerging products and services we now see in the marketplace.
Insurance is a great example of an industry ripe for innovation but hamstrung as one of the most highly regulated industries in Montana. That’s why I introduced HB 836 to create Montana’s first regulatory sandbox, providing property and casualty insurers with targeted red tape relief to encourage innovation and ultimately make it easier to do business in Montana.
Regulatory sandboxes are designed to help businesses bring a good idea for a new product or service to the marketplace that doesn’t fit within the existing regulations. Regulatory sandboxes work like this: businesses can apply to participate in the sandbox program and, if accepted, regulators will temporarily waive burdensome red tape and allow the product or service to be tested on a limited basis while maintaining oversight to protect consumer safety.
Under my bill, applicants for Montana’s insurance sandbox would first need to clearly explain how the new product or service would benefit consumers and then demonstrate the ability to financially cover potential risks. Sandbox participants would be required to notify consumers that the product or service is offered in the sandbox and submit regular reports to the Insurance Commissioner about their activities, including any consumer complaints. The regulatory waiver in the sandbox can last up to six years, but if at any time the agreed upon terms, conditions or limitations created to protect consumer safety are violated, the Commissioner may immediately revoke the waiver.
For us lawmakers, the regulatory sandbox will provide essential information about how to keep Montana’s regulations up to date. If an innovation is proven to work for consumers while in the sandbox, lawmakers can use that experience to inform permanent red tape relief measures that encourage innovation to benefit all Montanans.
While we may not yet know every type of innovative product or service that could arise from Montana’s insurance sandbox, we do have a few potential examples.
During testimony on my bill, we heard the Montana State Fund and other workers’ compensation insurers say they could use the sandbox to experiment with innovative incentive programs that reward businesses for taking steps to promote workplace safety or encourage employees return to work quicker after an accident. With Montana facing some of the highest worker compensation rates in the nation, driven by an industry injury and accident rate 1.26 times the nationwide average, innovations to promote safety and drive down the cost of insurance would be a welcome development for Montana businesses.
Another example is the emerging area of on-demand insurance, which allows policyholders to toggle insurance coverage on-and-off based on when it is needed. This could take the form of pay-per-mile insurance coverage for an expensive antique car that is only driven once or twice per year, or it could be a more flexible insurance policy for a professional camera used occasionally by an entrepreneur for their photography side-hustle. My bill would allow companies offering on-demand insurance to get targeted red tape relief in the sandbox to potentially test these innovative product ideas in Montana.
The more we can do to encourage and promote innovation in Montana, the better off we’ll all be. We can make Montana a regional hub for innovative business by cutting red tape for insurers in a regulatory sandbox, and perhaps even expanding the sandbox to other industries in the future.
Rep. Katie Zolnikov, R-Billings