Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 402 First Substitute (2020GS)

Sponsor

Rep. Robertson, A.

Final action

Governor Signed 3/24/2020

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• defines terms;
• creates an insurance regulatory sandbox program in the Department of Insurance, which allows a participant to temporarily test innovative insurance products or services on a limited basis without otherwise being licensed or authorized to act under the laws of the state;
• describes the application process and the conditions of participating in the program;
• describes the responsibilities of the Department of Insurance in administering the program; and
• describes reporting requirements for participants in the program and for the Department of Insurance.

Every vote on this bill

Bill text

REGULATORY WAIVER PROCESS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Adam Robertson
Senate Sponsor: 
Lincoln Fillmore
Cosponsors:
Jon Hawkins
Marc K. Roberts
LONG TITLE
General Description:
This bill modifies provisions related to the Department of Insurance.
Highlighted Provisions:
This bill:
▸ defines terms;
▸ creates an insurance regulatory sandbox program in the Department of Insurance,
which allows a participant to temporarily test innovative insurance products or
services on a limited basis without otherwise being licensed or authorized to act
under the laws of the state;
▸ describes the application process and the conditions of participating in the program;
▸ describes the responsibilities of the Department of Insurance in administering the
program; and
▸ describes reporting requirements for participants in the program and for the
Department of Insurance.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
ENACTS:
31A-47-101
, Utah Code Annotated 1953
31A-47-102
, Utah Code Annotated 1953
31A-47-103
, Utah Code Annotated 1953
31A-47-104
, Utah Code Annotated 1953
31A-47-105
, Utah Code Annotated 1953
31A-47-106
, Utah Code Annotated 1953
31A-47-107
, Utah Code Annotated 1953
31A-47-108
, Utah Code Annotated 1953
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
31A-47-101
 is enacted to read:
CHAPTER 47. INSURANCE REGULATORY SANDBOX PROGRAM
 31A-47-101.
Title.
This chapter is known as the "Insurance Regulatory Sandbox Program."
Section 2. Section 
31A-47-102
 is enacted to read:
 31A-47-102.
Definitions.
As used in this chapter:
(1) "Applicable agency" means a department or agency of the state, including the
department and the Department of Commerce, that by law regulates certain types of
insurance-related business activity in the state and persons engaged in such insurance-related
business activity, including the issuance of licenses or other types of authorization, which the
department determines would otherwise regulate an insurance sandbox participant.
(2) "Applicant" means an individual or entity that is applying to participate in the
insurance regulatory sandbox.
(3) "Blockchain technology" means the use of a digital database containing records of
financial transactions, which can be simultaneously used and shared within a decentralized,
publicly accessible network and can record transactions between two parties in a verifiable and
permanent way.
(4) "Consumer" means a person that purchases or otherwise enters into a transaction or
agreement to receive an innovative insurance product or service that is being tested by an
insurance sandbox participant.
(5) "Department" means the Department of Insurance.
(6) "Innovation" means the use or incorporation of a new or emerging technology or a
new use of existing technology, including blockchain technology, to address a problem,
provide a benefit, or otherwise offer a product, service, business model, or delivery mechanism
that is not known by the department to have a comparable widespread offering in the state.
(7) "Innovative insurance product or service" means an insurance product or service
that includes an innovation.
(8) (a) "Insurance product or service" means an insurance product or insurance service
that requires state licensure, registration, or other authorization as regulated by Title 31A,
Insurance Code, including an insurance product or insurance service that includes a business
model, delivery mechanism, or element that requires a license, registration, or other
authorization to do an insurance business, act as an insurance producer or consultant, or engage
in insurance adjusting as regulated by Title 31A, Insurance Code.
(b) "Insurance product or service" does not include a product or service that is
governed by Title 61, Chapter 1, Utah Uniform Securities Act.
(9) "Insurance regulatory sandbox" means the Insurance Regulatory Sandbox Program
created by Section 
31A-47-103
, which allows a person to temporarily test an innovative
insurance product or service on a limited basis without otherwise being licensed or authorized
to act under the laws of the state.
(10) "Insurance sandbox participant" means a person whose application to participate
in the insurance regulatory sandbox is approved in accordance with the provisions of this
chapter.
(11) "Test" means to provide an innovative insurance product or service in accordance
with the provisions of this chapter.
Section 3. Section 
31A-47-103
 is enacted to read:
 31A-47-103.
Insurance Regulatory Sandbox Program -- Application
requirements.
(1) There is created in the department the Insurance Regulatory Sandbox Program.
(2) In administering the insurance regulatory sandbox, the department:
(a) shall consult with each applicable agency;
(b) shall establish a program to enable a person to obtain limited access to the market
in the state to test an innovative insurance product or service without obtaining a license or
other authorization that might otherwise be required;
(c) may enter into agreements with or follow the best practices of the Consumer
Financial Protection Bureau or other states that are administering similar programs; and
(d) may not approve participation in the insurance regulatory sandbox program by an
applicant or any other participant who has been convicted, entered a plea of nolo contendere, or
entered a plea of guilty or nolo contendere held in abeyance, for a crime:
(i) involving theft, fraud, or dishonesty; or
(ii) that bears a substantial relationship to the applicant's or participant's ability to
safely or competently participate in the insurance regulatory sandbox program.
(3) An applicant for the insurance regulatory sandbox shall provide to the department
an application in a form prescribed by the department that:
(a) includes a nonrefundable application fee of $4,500, which fee may be waived or
reduced by the department if the applicant holds a license issued by the department under the
provisions of Title 31A, Insurance Code;
(b) demonstrates the applicant is subject to the jurisdiction of the state;
(c) demonstrates the applicant has established a physical or virtual location that is
adequately accessible to the department, from which testing will be developed and performed
and where all required records, documents, and data will be maintained;
(d) contains relevant personal and contact information for the applicant, including legal
names, addresses, telephone numbers, email addresses, website addresses, and other
information required by the department;
(e) discloses criminal convictions of the applicant or other participating personnel, if
any;
(f) demonstrates that the applicant has the necessary personnel, financial and technical
expertise, access to capital, and developed plan to test, monitor, and assess the innovative
insurance product or service;
(g) contains a description of the innovative insurance product or service to be tested,
including statements regarding all of the following:
(i) how the innovative insurance product or service is subject to licensing or other
authorization requirements outside of the insurance regulatory sandbox, including a specific list
of all state laws, regulations, and licensing or other requirements that the applicant is seeking to
have waived during the testing period;
(ii) how the innovative insurance product or service would benefit consumers;
(iii) how the innovative insurance product or service is different from other insurance
products or services available in the state;
(iv) what risks may confront consumers that use or purchase the innovative insurance
product or service;
(v) how participating in the insurance regulatory sandbox would enable a successful
test of the innovative insurance product or service;
(vi) a description of the proposed testing plan, including estimated time periods for
beginning the test, ending the test, and obtaining necessary licensure or authorizations after the
testing is complete;
(vii) a description of how the applicant will perform ongoing duties after the test; and
(viii) how the applicant will end the test and protect consumers if the test fails,
including providing evidence of sufficient liability coverage and financial reserves to protect
consumers and to protect against insolvency by the applicant; and
(h) provides any other required information as determined by the department.
(4) An applicant shall file a separate application for each innovative insurance product
or service that the applicant wants to test.
(5) After an application is filed and before approving an application, the department
may seek any additional information from the applicant and from the department's own
research that the department determines is necessary, including:
(a) proof of sufficient assets, accounts, liability coverage, surety bond coverage, or
other preparation by the applicant to ensure that consumers are protected and that the applicant
will be able to cover ongoing duties when the test ends or if the test ends early; and
(b) industry ratings and past performance of the applicant.
(6) Subject to Subsection (7), not later than 90 days after the day on which a complete
application is received by the department, the department shall inform the applicant as to
whether the application is approved for entry into the insurance regulatory sandbox.
(7) The department and an applicant may mutually agree to extend the 90-day time
period described in Subsection (6) for the department to determine whether an application is
approved for entry into the insurance regulatory sandbox.
(8) (a) In reviewing an application under this section, the department shall consult
with, and get approval from, each applicable agency before admitting an applicant into the
insurance regulatory sandbox.
(b) The consultation with an applicable agency may include seeking information about
whether:
(i) the applicable agency has previously issued a license or other authorization to the
applicant;
(ii) the applicable agency has previously investigated, sanctioned, or pursued legal
action against the applicant;
(iii) whether the applicant could obtain a license or other authorization from the
applicable agency after exiting the insurance regulatory sandbox; and
(iv) whether certain licensure or other regulations should not be waived even if the
applicant is accepted into the insurance regulatory sandbox.
(9) In reviewing an application under this section, the department shall consider
whether a competitor to the applicant is or has been an insurance sandbox participant and, if so,
weigh that as a factor in favor of allowing the applicant to also become an insurance sandbox
participant.
(10) If the department and each applicable agency approve admitting an applicant into
the insurance regulatory sandbox an applicant may become an insurance sandbox participant.
(11) The department may deny any application submitted under this section, for any
reason, at the department's discretion.
(12) If the department denies an application submitted under this section, the
department shall provide to the applicant a written description of the reasons for the denial as
an insurance sandbox participant.
Section 4. Section 
31A-47-104
 is enacted to read:
 31A-47-104.
Scope of the insurance regulatory sandbox.
(1) If the department approves an application under Section 
31A-47-103
, the insurance
sandbox participant has 12 months after the day on which the application was approved to test
the innovative insurance product or service described in the insurance sandbox participant's
application.
(2) An insurance sandbox participant testing an innovative insurance product or service
within the insurance regulatory sandbox is subject to the following:
(a) consumers shall be residents of the state;
(b) the department may, on a case by case basis, specify the maximum number of
consumers that may enter into an agreement with the insurance sandbox participant to use the
innovative insurance product or service;
(c) the department may, if applicable and on a case by case basis, specify the maximum
number of items and the maximum coverage amount for each item that may be offered by an
insurance sandbox participant during the testing of the innovative insurance product or service;
and
(d) the department may, on a case by case basis, specify liability coverage requirements
and minimum financial reserves requirements that the insurance sandbox participant shall meet
during the testing of the innovative insurance product or service.
(3) This section does not restrict an insurance sandbox participant who holds a license
or other authorization in another jurisdiction from acting in accordance with that license or
other authorization.
(4) An insurance sandbox participant is deemed to possess an appropriate license under
the laws of the state for the purposes of any provision of federal law requiring state licensure or
authorization.
(5) An insurance sandbox participant that is testing an innovative insurance product or
service is not subject to state laws, regulations, licensing requirements, or authorization
requirements that were identified by the insurance sandbox participant in the insurance
sandbox participant's application and have been waived in writing by the department. 
(6) Notwithstanding any other provision of this chapter, an insurance sandbox
participant does not have immunity related to any criminal offense committed during the
insurance sandbox participant's participation in the insurance regulatory sandbox.
(7) By written notice, the department may end an insurance sandbox participant's
participation in the insurance regulatory sandbox at any time and for any reason, including if
the department determines an insurance sandbox participant is not operating in good faith to
bring an innovative insurance product or service to market.
(8) The department and the department's employees are not liable for any business
losses or the recouping of application expenses related to the insurance regulatory sandbox,
including for:
(a) denying an applicant's application to participate in the insurance regulatory sandbox
for any reason; or
(b) ending an insurance sandbox participant's participation in the insurance regulatory
sandbox at any time and for any reason.
(9) No guaranty association in the state may be held liable for business losses or
liabilities incurred as a result of activities undertaken by a participant in the insurance sandbox.
Section 5. Section 
31A-47-105
 is enacted to read:
 31A-47-105.
Consumer protection for insurance regulatory sandbox.
(1) Before providing an innovative insurance product or service to a consumer, an
insurance sandbox participant shall disclose the following to the consumer:
(a) the name and contact information of the insurance sandbox participant;
(b) that the innovative insurance product or service is authorized pursuant to the
insurance regulatory sandbox and, if applicable, that the insurance sandbox participant does not
have a license or other authorization to provide an insurance product or service under state laws
that regulate insurance products or services outside the insurance regulatory sandbox;
(c) that the innovative insurance product or service is undergoing testing and may not
function as intended and may expose the customer to financial risk;
(d) that the provider of the innovative insurance product or service is not immune from
civil liability for any losses or damages caused by the innovative insurance product or service;
(e) that the state does not endorse or recommend the innovative insurance product or
service;
(f) that the innovative insurance product or service is a temporary test that may be
discontinued at the end of the testing period;
(g) the expected end date of the testing period; and
(h) that a consumer may contact the department to file a complaint regarding the
innovative insurance product or service being tested and provide the department's telephone
number and website address where a complaint may be filed.
(2) The disclosures required by Subsection (1) shall be provided to a consumer in a
clear and conspicuous form and, for an Internet or application-based innovative insurance
product or service, a consumer shall acknowledge receipt of the disclosure before a transaction
may be completed.
(3) The department may require that an insurance sandbox participant make additional
disclosures to a consumer.
Section 6. Section 
31A-47-106
 is enacted to read:
 31A-47-106.
Requirements for exiting insurance regulatory sandbox.
(1) At least 30 days before the end of the 12-month insurance regulatory sandbox
testing period, an insurance sandbox participant shall:
(a) notify the department that the insurance sandbox participant will exit the insurance
regulatory sandbox, discontinue the insurance sandbox participant's test, and will stop offering
any innovative insurance product or service in the insurance regulatory sandbox within 60 days
after the day on which the 12-month testing period ends; or
(b) seek an extension in accordance with Section 
31A-47-107
.
(2) Subject to Subsection (3), if the department does not receive notification as
required by Subsection (1), the insurance regulatory sandbox testing period ends at the end of
the 12-month testing period and the insurance sandbox participant shall immediately stop
offering each innovative insurance product or service being tested.
(3) If a test includes offering an innovative insurance product or service that requires
ongoing duties, the insurance sandbox participant shall continue to fulfill those duties or
arrange for another person to fulfill those duties after the date on which the insurance sandbox
participant exits the insurance regulatory sandbox.
Section 7. Section 
31A-47-107
 is enacted to read:
 31A-47-107.
Extensions.
(1) Not later than 30 days before the end of the 12-month regulatory insurance sandbox
testing period, an insurance sandbox participant may request an extension of the insurance
regulatory sandbox testing period for the purpose of obtaining a license or other authorization
required by law.
(2) The department shall grant or deny a request for an extension in accordance with
Subsection (1) by the end of the 12-month insurance regulatory sandbox testing period.
(3) The department may grant an extension in accordance with this section for not
more than six months after the end of the insurance regulatory sandbox testing period.
(4) An insurance sandbox participant that obtains an extension in accordance with this
section shall provide the department with a written report every three months that provides an
update on efforts to obtain a license or other authorization required by law, including any
submitted applications for licensure or other authorization, rejected applications, or issued
licenses or other authorization.
Section 8. Section 
31A-47-108
 is enacted to read:
 31A-47-108.
Record keeping and reporting requirements.
(1) An insurance sandbox participant shall retain records, documents, and data
produced in the ordinary course of business regarding an innovative insurance product or
service tested in the insurance regulatory sandbox.
(2) If an innovative insurance product or service fails before the end of a testing period,
the insurance sandbox participant shall notify the department and report on actions taken by the
insurance sandbox participant to ensure consumers have not been harmed as a result of the
failure.
(3) The department shall establish quarterly reporting requirements for an insurance
sandbox participant, including information about any customer complaints.
(4) The department may request records, documents, and data from an insurance
sandbox participant and, upon the department's request, an insurance sandbox participant shall
make such records, documents, and data available for inspection by the department.
(5) If the department determines that an insurance sandbox participant has engaged in,
is engaging in, or is about to engage in any practice or transaction that is in violation of this
chapter or that constitutes a violation of a state or federal criminal law, the department may
remove an insurance sandbox participant from the insurance regulatory sandbox.
(6) By October 1, the department shall provide an annual written report to the Business
and Labor Interim Committee that provides information regarding each insurance sandbox
participant and that provides recommendations regarding the effectiveness of the Insurance
Regulatory Sandbox Program.