The Insurance Regulatory and Development Authority of India (IRDAI) is working on the guidelines for 'sandbox' method which will allow insurance companies to test products in a particular geography or among a set of few policyholders before they are available in the market.

"There are some new types of products which have not been tested out. Suppose, some companies want to experiment with innovative products then we can allow them through a regulatory sandbox method wherein a limited scale, either for a limited geography or a limited number of policyholders it will be tried out, so we will allow them," said SC Khuntia, chairman of IRDAI.

Khuntia, while speaking at the ASSOCHAM Insurance Summit in Mumbai, also expressed concerns about low levels of persistency in life insurance sector.

He said that, 13th month persistency in India is around 81%, while the world average is 90%. "Persistency levels need to be improved. Affordability and misselling are two factors that impact the persistency of life insurance policies. If we improve this persistency, we will have much more money available, and that will go to long-term savings which will result in much higher economic development in the country because long-term projects need a type of funding that can be supplied only by the insurance industry because we can invest it for a much longer period of time," added Khuntia.

Industry participants believe that the move will lead to further innovation in insurance products. Insurance regulator also asked insurance companies to come out with long term health insurance policies, which are currently available in two wheeler and four wheeler insurance.

Expressing concern over lower penetration of insurance in the country, which is only 3.69% of the gross domestic product (GDP) as against global average of 6.2%, the regulator urged the industry to further spread awareness among the general public about the importance of insurance, especially among youth.