Countersignature Requirements
Some states require the countersignature of a resident agent when a non-resident agent
transacts business in the state. The assumption was that a non-resident agent would not
know enough about local state laws to give good advice. This requirement places an obvious
barrier on electronic distribution from a central location. The Working Group recommends
its elimination.
Signature Requirements
Insurance law is filled with signature requirements. The signature authenticates the
signer. In the life and health insurance business, an insurer can assert that an applicant
misrepresented facts if these erroneous facts are listed in an application signed by the
individual.
Because of this situation, insurers require that signed applications accompany all
underwritten policies. The Working Group recommends allowing digital signatures and
electronic authentication as substitutes for wet signatures. It also envisions the
possibility that other technologies in addition to digital signatures be used for
authentication. It specifically states that electronic authentication should be permitted
for the application and claims processes.
It also recommends a review of all authentication requirements associated with insurance
transactions and a removal of those that inhibit electronic commerce. For example, in the
case of private passenger auto insurance, it recommends removal of the requirement that
applicants submit additional paper forms verifying that they were offered uninsured
motorist coverage. Instead, applicants could make a similar verification as part of the
electronic application process.
Delivery of Documents
Insurance law is replete with paper document delivery requirements. Many states have
laws requiring the delivery of paper documents for policies, position letters from claims,
billing notices, cancellation/non-renewal notices, and certificates of insurance.
The Working Group recommends allowing electronic document delivery to substitute for paper
delivery if all parties to the transaction are in agreement. There must be some method of
verifying receipt of the document by the insured, and acceptable records must be
maintained. The insurer must maintain these documents in either electronic or paper form
and be able to produce them in either electronic or paper form to the insured.
Format of Documents
Many state laws impose requirements with regard to the font size, margins, paper
color, and paper size of insurance documents. The Working Group recommends interpreting
existing laws for electronic purposes by requiring the use of a font with characters
"which are clearly discernable and understandable to a person conversant in the
written language presented, with as nearly as possible, in the given font, the same
relative character sizes for different parts of the document as are specified under the
current law." A large-print option should be available for those with diminished
eyesight.
Electronic Payments
Some states prohibit the use of credit cards to pay premiums. Some state laws that
allow payment of claims by electronic funds transfer may not currently be written so that
they allow the use of electronic checks. Others require settlement refunds by check and do
not allow transfers to a premium account or bank account. In some cases where insurance
regulators permit electronic rate filing, they still require that associated payments be
made by mailed checks. The Working Group recommends the elimination of all prohibitions
against electronic payments.
Records Retention
Many states require the retention of paper documents for many years. The Working Group
recommends allowing records to be maintained in any medium or by any process that
accurately reproduces or forms a durable medium for the reproduction of a record. The
Working Group notes that the technology associated with records retention continues to
evolve.
Disclosure of License Status
Insurance regulations require license status disclosure so consumers will know whether
the insurer or agent is authorized to transact a particular business in a particular
location. Some of these requirements use terminology that does not apply readily to
electronic transactions. The Working Group recommends that specific disclosure statements
appear on the Internet sites of insurers and agents. In the case of an insurer, these
statements must include name, any group with which it is affiliated, and the name, phone
number, and address for the state insurance department. Agents face similar requirements.
Advertising
Some insurance regulations require filing and prior approval of advertising material.
The fact that an insurer maintains an Internet site does not necessarily mean the insurer
is advertising or trying to conduct business in a particular state. The Working Group
recommends the elimination of requirements for the filing and prior approval of
advertising.
Compensation
In some cases, insurers enter agreements with Internet third party service providers
that require compensation of the providers on the basis of a percentage of premiums. This
compensation arrangement tends to cause the service providers to be treated as agents
under some state insurance laws. The NAIC’s Producer Licensing Working Group is
dealing with this issue.
Code and Regulation Clean-up
Because so many state laws contain terminology incompatible with electronic commerce,
the Working Group recommends that language be enacted that globally allows the
interpretation of existing laws in a way that embraces electronic commerce. The state of
Arkansas recently enacted such legislation. It should shorten by many years the time
required to create a legal environment hospitable to insurance electronic commerce.
Proof of Coverage
In many cases, individuals are required to demonstrate proof that they are covered by
insurance. For example, the police may ask someone to prove he has auto insurance
coverage. If this proof of coverage is maintained in electronic form, the Working Group
recommends that it be producible in a format that satisfies requirements for proof of
coverage.
Privacy Issues
The Working Group has not yet drafted its recommendations with regard to privacy.
