ASIC’s push to encourage insurance innovation is under review – and the early verdict from the market isn’t flattering.
In a submission to a Treasury review of the Enhanced Regulatory Sandbox (ERS), Insurtech Australia says the regulator has made a “genuine and sustained effort” to enable financial innovation – but that effort “has not made an impact on the insurance industry and insurtech ecosystem.”
No business providing insurance-specific services has successfully relied on the ERS, and claims handling isn’t even eligible – a major constraint when most meaningful innovation is happening in claims, underwriting and risk.
The timing matters. The independent chair of the ERS review and an ASIC senior executive are both speaking at InsurtechLIVE26 in Sydney on 18 February 2026. We’ll be there too – because this conversation goes to the heart of how insurance innovation really happens.
The blunt question is:
If regulatory sandboxes don’t move the needle, what does?
From where we sit – inside the operating stack of carriers, MGAs and brokers – the answer is clear:
The real sandbox isn’t at the regulator. It’s in your own systems, with the ability to rapidly prototype products, distribution and onboarding.
The ERS lets firms test some financial services without a full AFSL, under strict limits. On paper, that sounds like a good way to de-risk experimentation. In practice, it’s structurally misaligned with how insurance innovation works.
Insurtech Australia is direct: the ERS is “poorly suited to claims, underwriting and risk-management innovations, where learning requires scale, time and credible claim-loss experience.”
Most meaningful insurance innovation needs:
The ERS caps exposure to $10,000 per retail client, which the submission calls “materially constraining testing of insurance propositions, where premiums are often low but risk exposure is high and can be long-tailed.” That might suit some fintech experiments; it’s poorly matched to parametric events, catastrophe covers or automated claims at meaningful scale.
The framework today is described as a “passive exemptions framework with weak transition pathways and an innovation test emphasising the underlying product rather than the enabling technology.”
But in most insurers, the product is not the main constraint. From our perspective, the hard part is:
That’s about the platform backbone you’re running on.
The submission points to “complexity, fragmented oversight and limited pathways to scale” in the current regime, and notes that other countries embed sandboxes into licensing, supervision and market development more effectively.
Even if you manage to get something live in the ERS, the path from “test” to “scaled BAU” is slow and unclear. For a startup with limited capital – or a business unit with limited internal political capital – that’s often a deal-killer.
None of this means regulators shouldn’t try to support innovation. It does mean that waiting for the regulator’s sandbox to make innovation safe is a losing strategy.
For insurers, the practical sandbox looks very different:
In practice, your internal sandbox should let you:
This is exactly the backbone we’ve built at InsuredHQ: a platform that lets insurers, MGAs and brokers experiment in live or near-live environments, across both product design and go-to-market, without asking for a new core system project every time.
Innovation isn’t just “new insurance ideas”. It’s also how quickly you can try them with real customers, and retire what doesn’t work.
If you accept that the real sandbox is internal, the next step is to make it concrete. Here’s a pattern we see working in the field.
Pick a specific innovation, for example:
Then define:
On a configurable platform, your team should be able to:
If every small variant requires months of development and testing on an inflexible legacy core, you don’t have a sandbox; you have a change-control log.
Before going live, align on:
Then treat the initiative as an experiment: run it, review it, scale or shut it down. The value is not just in successes; it’s in how cheaply you can learn.
Insurtech Australia is not arguing to scrap the ERS, but to reform it: tiered pathways that distinguish startups from incumbents, risk-based limits for insurance tests, and better co-ordination across regulators so innovations like parametric products, AI-driven underwriting and automated claims can be tested without full obligations upfront.
A constructive direction from here would be frameworks that:
InsurtechLIVE26 in Sydney on 18 February will bring regulators, incumbents and insurtechs together to talk exactly about this: the role of technology in enabling insurance innovation. We’ll be in the room, because the bridge between policy intent and operational reality is where we work every day.
Regulatory sandboxes are useful signalling. They are not where real insurance innovation lives.
If you’re an insurer, MGA or intermediary in Australia or New Zealand, your real innovation leverage is your ability to:
That’s the sandbox that matters.
If you’re heading to InsurtechLIVE26 and want to compare notes on how organisations are already running low-risk experiments on live systems with InsuredHQ as the backbone, come find us in Sydney – or reach out beforehand and we’ll line up time.