The Health Ministry, in collaboration with the Israel Innovation Authority, recently issued a call for information regarding groundbreaking initiatives in the field of artificial intelligence (AI) in healthcare. This move is part of an exploration into the feasibility of establishing a “regulatory sandbox” for medical AI. The goal is to provide a supervised testing environment for innovative AI systems, while mitigating associated risks and designing an appropriate regulatory framework.
AI technologies currently integrated into clinical healthcare environments focus on decision-support systems. This new initiative aims to promote more advanced solutions that either fully automate medical tasks or significantly shift the division of labor among healthcare professionals, all while addressing current regulatory constraints.
The idea of establishing a regulatory sandbox in the medical field is a welcome development. It has the potential to encourage innovation and enhance the quality of healthcare services in Israel. However, before moving forward, valuable lessons can be drawn from another domain where regulatory sandboxes have existed for over a decade: the fintech sector.
Advantages of regulatory sandboxes
Experience in fintech shows that sandboxes offer several advantages. On the one hand, they allow entrepreneurs to develop and test innovative products in a supportive regulatory environment, with reduced oversight requirements during the trial phase. At the same time, they enable regulators to assess the appropriate level and type of regulation throughout the development process, and adapt accordingly. Regulatory sandboxes foster technological advancement, attract new players to the market, and enhance competition.
In the UK, for instance, companies that successfully completed the Financial Conduct Authority’s (FCA) sandbox program were more likely to attract investors. Venture capital firms have shown greater willingness to invest in startups testing their products within such frameworks. One report even found that participation in the FCA’s sandbox accelerated time-to-market by 40% compared to traditional regulatory licensing processes.
Today, regulatory sandboxes in the financial sector operate in over 100 countries. Some are even cross-border initiatives involving multiple jurisdictions.
Inspired by the positive outcomes in fintech, many countries have begun establishing sandboxes for AI applications across various domains. Notably, the new European Union AI Act requires each member state to establish at least one AI-focused regulatory sandbox.
Challenges and requirements of sandbox frameworks
However, as I detail in my recent academic paper (published in Artificial Intelligence in Israeli Law, in Hebrew), it is important not to overlook the challenges inherent to sandbox frameworks. Fintech experience shows that working individually with each company requires substantial resources from the regulator.
Significant domain expertise is also necessary to evaluate proposed innovations effectively. A lack of resources, insufficient specialization, regulatory misjudgments, or poorly designed sandbox programs can result in unforeseen consequences, potentially harming consumers, markets, or regulatory credibility.
These challenges are even more pronounced in the context of AI. AI systems are complex and rapidly evolving, demanding specialized knowledge from regulators. Moreover, the potential risks to human rights and civil liberties require the integration of effective safeguards into sandbox programs.
Healthcare adds yet another layer of complexity. Regulatory sandboxes in this domain must address the privacy of patient data, the safety and efficacy of treatments, and strict compliance with medical standards.
Here, the risks are not only operational or regulatory; they can affect patients’ health and even endanger lives. This reality necessitates a delicate balance between fostering innovation and maintaining rigorous oversight.
Israel stands to benefit significantly from the Health Ministry and the Innovation Authority’s proposal to establish a regulatory sandbox for medical AI. Success, however, hinges on carefully balancing innovation with caution, and effectively addressing the complex challenges such a program presents.
The writer is the head of the Center for Banking Law and Financial Regulation at the Netanya Academic College.