E-Signature Can Provide Peace Of Mind For Insurance Carriers

Mary Ellen Power, January 27, 2014

It is probably not too far from the truth to state that most people don't actually read their insurance policy until they have to make a claim. For anyone that has worked in the industry or has a passing knowledge of how it operates, there are numerous examples of an insured person or persons only taking the time to study the policy terms and conditions when an actual loss has occurred. This is then the moment that they discover that an exclusion exists that covers that exact situation.

Naturally, this is a broad and sweeping generalization, but a recent report commissioned by the Center for Study of Insurance Operations has highlighted the benefits that electronic signature can bring to both the insured and the insurer in terms of understanding the limits of offered coverage. According to Canadian Underwriter magazine, insurance carriers and brokers should make sure that those seeking cover are fully aware of not only the limits of liability, but the terms and conditions of the policy itself - an important consideration in the event of a dispute.

E-Signature Implementation Options for Insurance Companies

Featuring presenters from Donegal Group and TransGuard, this presentation highlights two very different approaches to implementing e-signatures.

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Reducing the risk

For those in the insurance industry, any technology that can speed up processing and increase the number of transactions is obviously welcomed, but the underlying philosophy of insurance remains the same - the paying of a premium to cover risk of a loss, and the compensation of an insured person in the event of a claim.

With more companies now integrating electronic signatures into their working practices, the need for signed agreement becomes paramount, especially when it comes to confirming that the insured has read and, more importantly perhaps, understands the legal agreement that they are entering into. Insurance exists to provide peace of mind in the event of a loss, but making sure that an individual has taken note of what they are buying should not always be the responsibility of the company that offers the cover.

Carriers should, according to the report, determine whether or not a person has a) signed a document and b) agreed to the policy terms and conditions. With that in mind, the authors of the CSIO report believe that there should be a stipulation that insurers require - as part of the e-signature process itself - the person or persons seeking coverage to access and open all associated documents before the policy can incept.

"This helps to evidence that the signer had an opportunity to read and understand the document before signing it," they wrote. "For audit trail purposes, consider how each electronic document can be tracked so that important audit trail information is recorded and associated with the record. For example, technological means can be employed so that the document is electronically stamped with the time and date through all steps in the process."

Increase understanding

Of course, it follows that merely opening a document doesn't always mean that an insured person has read the contents themselves, but it can limit the opportunities for an individual to claim that they weren't aware of an exclusion in the event of a loss. At the same time, secure and encrypted e-signature technology  provides the insurance company with a demonstrated audit trail, and reduces the chances that a person will challenge the insurance agreement itself.

"When determining whether an individual signed a document, one generally relies on the individual's signature as evidence of his or her agreement to the document's contents," the report noted. "At one extreme, an original handwritten signature can be difficult to replicate. Even more difficult to replicate (and at the other technological extreme) is a digital signature (i.e., involving public / private key encryption). Between these two extremes are a range of electronic signature options which are more or less reliable, depending on the circumstances."

For more information as to how electronic signature can provide peace of mind, please read the whitepaper on E-Signature Strategies for Insurance Carriers.