New federal laws that will benefit insurtechs by reducing red tape and are aimed at promoting innovation by making it easier for fintech businesses to trial new products are set to take effect on September 1.

Regulations were last week broadened to include services which advise on or distribute insurance.

Like other insurers, insurtechs are required to be licensed to provide financial services in Australia. But Financial Services and Financial Technology Assistant Minister Jane Hume says the new “sandbox” laws removing red tape will foster greater choice and technology that is convenient, tailored and cost effective.

“The enhanced sandbox will provide a further boost to Australia’s rapidly maturing fintech ecosystem, reducing barriers to entry and promoting competition,” she says.

The new rules, which apply to all fintech companies, allow insurtechs to test new products and services for 24 months without obtaining a financial services licence from the Australian Securities and Investments Commission (ASIC), which can be costly and time-consuming to obtain.

This allows insurtechs to work out if their ideas are robust and have value for consumers.

Insurtechs will be required to demonstrate that their proposed service is genuinely innovative and is likely to result in net consumer benefit, must have adequate professional indemnity insurance and be a member of the Australian Financial Complaints Authority (AFCA).