The Canadian Perspective: Legal Best Practices for e-Signatures in Insurance part I
Daniel Fabiano presented a webinar* "Insurance Documentation: E-Signature & E-Delivery" with OneSpan. To listen to the complete transcript.
Mr. Fabiano is a partner at Fasken Martineau DuMoulin LLP. In this capacity, he advises technology providers, developers and users in a number of capacities including Internet, e-commerce platforms, social media, licensing and privacy matters. He recently authored the advisory report on electronic signature and delivery commissioned by the Center for Study of Insurance Operations.
Electronic Signatures for Insurance: Putting Down the Pen and Ditching the Paper
For many business sectors, going paperless is a major efficiency initiative – and the financial and insurance sector is no exception. E-commerce (which can refer to a number of topics, including electronic contracting / electronic signatures, electronic delivery of documents, and retaining electronic records in place of paper records) can automate and expedite business processes. E-commerce can cut operational costs, and improve efficiency and collaboration across an organization’s teams. E-commerce can also improve the customer experience in that customers are increasingly expecting an electronic platform when they are dealing with businesses. Also, it is environmentally friendly because you’re not dealing with all the paper.
Naturally, there is resistance to change. A move to an e-commerce model is often met with legal compliance and security concerns. Many organizations are concerned that such a move carries with it compliance and liability risk. However, these concerns are actually counter-intuitive: there are obvious and powerful advantages to e-commerce – including the potential for heightened compliance measures and increased security. A well-designed e-commerce regime can address risks and mitigate them.
In Canada, provincial and federal e-commerce legislation governs e-commerce. These laws are of general application, meaning that they apply regardless of the business sector. When looking at the insurance sector, we also need to understand how insurance laws may further constrain the parameters of an e-commerce process. Like e-commerce laws, insurance laws are also found at the federal and provincial level. This patchwork of laws may seem daunting, but fortunately each of the e-commerce and insurance regimes are generally similar nation-wide. With an understanding of how these two regimes overlap, you have a general outline of what an e-commerce process may look like for agents, brokers and insurance companies.
E-commerce laws apply to commercial activities unless those activities are expressly excluded from e-commerce laws or by some other legal requirement which bars an e-commerce approach (e.g., requirements to deliver notices by registered mail could not be met by electronic delivery). E-commerce laws generally contain the following exclusions:
- Wills/codicils (although some provinces do not exclude them)
- Trusts created by wills/codicils
- Powers of attorney
- Negotiable instruments
- Land transfer/registration
These are not core documents for the insurance space.
E-signatures for Insurance
Now we have to overlap this list with what the insurance laws say. Canadian insurance laws impose additional exclusions around what can be done electronically rather than in paper form. Some of these insurance laws have been amended to specifically reference e-commerce while others are silent as to whether a particular activity can be done through e-commerce. Although the laws vary across Canada, the following declarations and similar document are not permitted to be effected by electronic means:
- Notice of cancellation
- Alterations to policy by insurer
- Trustee appointment
- Beneficiary designation*
- Nomination of person as having rights/interests of insured on insured’s death
One notable concern is for beneficiary designations. The designation of a beneficiary may be found to be a testamentary disposition and may be held invalid if not in writing (in a traditional pen-and-ink sense), as required by provincial succession laws. Some provinces have addressed this constraint and have amended their laws to permit electronic designation of beneficiary. Because there is variation across Canada, you will need to understand the insurance laws applicable to you to determine what can be done via e-commerce.
*This blog is for general information only. It is neither intended as, nor should be construed as, legal advice or opinion. Insurance and e-commerce laws in Canada vary by province. For legal advice that is specific to your jurisdiction and situation, please consult a lawyer.