Insurance agencies have long been ground zero for this paper intense society in which we exist.  The reality of uploading to insurance companies brings even more paper to the insurance agency.  Suddenly, the agency is being appointed by the company as the custodian of the record.  With that responsibility comes the additional chore of warehousing and maintaining the original application with its wet signatures.

I was wondering just how this new law would affect the insurance agency operation.  It has long been the goal of the automated agency to rid itself of the paper that seems to grow at an alarming rate.  Do you remember those space movies of the past, where some intergalactic molecule or cell would grow from the size of a pinhead to the size of Manhattan Island over night?  That is how it feels sometimes to the typical size agency of 1500 clients, and there does not seem to be an end in sight.

I was fortunate to sit in on a class at the FYI 2000 EXPO given by Attorney E. Alan Miller, Esq., from the law firm of Webb, Carlock, Copeland, Semler & Stair, LLP, on the effects of the new E-Sign law on insurance agencies.  I have asked Alan to answer some questions pertaining to the new law and it's relationship to the States that had previously adopted the electronic signature.

Q. Alan, please explain the new E-Sign law and its potential impact upon the insurance industry and the insurance contract?
A. Well, Ron, that is an extremely broad question since the E-Sign law, or as it is officially titled, Electronic Signatures and Global and National Commerce Act, is a major piece of litigation and an attempt by the federal government to make E-Commerce uniform and easier to conduct across state lines. 
Let me try to answer it this way.  The effect this Act could have on the insurance industry and the insurance contract is overwhelming, but only if E-Commerce and Internet downloading, uploading and the use of electronic signatures is, in fact, employed by the insurance agency.  You see, Congress approved the Act known as the Electronic Signatures and Global and National commerce Act or "E-Sign" back in the spring of this year.  It was signed by the President on June 30, 2000. It was enacted to force the states that had not enacted the Uniform Electronic Transaction Act or UETA, to have something in place, if not UETA, then E-Sign.
Eighteen states presently have enacted UETA. Thus E-Sign does not apply to those states.  UETA is, in fact, pending in at least another ten states. You see, UETA was approved by the National Conference of Commissioners on Uniform State Laws at its annual meeting in July, 1999 as the body of legislation validating the use of electronic records and electronic signatures.  In several instances, E-Sign actually uses the exact language of UETA without any changes whatsoever. 

Q. What exactly is a digital signature?
A. A digital signature is not just a digitized image of a handwritten signature.  It is an electronic code that can be used to authenticate the identity of the sender of a message or the signer of a document received on the Internet.  In other words, it is a "trustworthy" electronic signature.  With the advent of encryption and other coding devices, signatures over the Internet are as trustworthy and provable as a regular signature or as it has come to be known, "wet" signature.  With the coding, the original content of the message, as well as the fact that it is in fact the signature of the person who wrote it can be ensured during transit over the Internet.

Q. How does UETA differ from the E-Sign law?
A. As I stated above, UETA is basically the state equivalent of E-Sign.  E-Sign is the federal equivalent of UETA.  E-Sign was adopted basically because several states seemed to be taking too much time to adopt UETA.  There are several areas that UETA and E-Sign overlap. In fact, E-Sign makes it clearly evident that state law, whether it be the adoption of UETA or other state law, may not modify, limit, or supersede E-Sign except under limited conditions.  If a state has already enacted UETA, the state law will govern then.  Moreover, if the state has other provisions in place, those provisions can survive the enactment of E-Sign as long as that state law specifies alternative procedures or requirements for the use or acceptance of electronic records or electronic signatures and those requirements are consistent with E-Sign. 
In a nutshell, while UETA and E-Sign are much alike, the biggest difference between the two appears to be that UETA encourages states to use their laws that are already on their books and/or add to it in order to improve uniformity of E-Commerce between the states.  E-Sign, on the other hand, tends to limit the authority of the state to override its provisions and basically states that its provisions may not be circumvented. It limits the power of the states by stating that it may not be exercised in a manner inconsistent with E-Sign.
Like UETA, E-Sign attempts to equate electronic signatures, documents and commerce as the substantial equivalent to paper or wet records signatures and documents. That is the true intent of both UETA and E-Sign.

Q.  What effect does the E-Sign law have on record keeping responsibilities of the insurance agent?                       
A. The effect of the E-Sign law is to simply attempt to validate the use of the Internet, E-Signatures and E-Commerce, so that anyone who chooses to, can use this technology to its fullest capability to streamline not only the insurance application and insurance claim process etc., but also to promote and encourage the paperless environment.  The record keeping responsibilities of the insurance agent are really not any greater or lesser due to the E-Sign law.  However, the ability and capability of keeping those records has to be much, much easier as far as time, as far as space, and as far as the general overall responsibility of keeping the records of the insurance process in a safe place.

Q.  Are their any other areas that would affect the insurance agency's use of the electronic signature and record keeping that we haven't discussed up to this point?
A. The claims process would be another area that would be quicker and streamlined by use of the Internet.  Electronic signatures, as well as electronic record keeping in claims, could be improved dramatically.  Just as we see communication over the Internet and the availability of information increasing tenfold, the ability to communicate more quickly and more accurately with electronic signatures and electronic communication, rather than depending on the telephone or the U. S. Mail System, should streamline the claim process, thus promoting even more the paperless office.

Let me say this in closing, Ron.  The ability to access information is one of the greatest attributes of the Internet explosion. Anyone at anytime can basically tap into an endless library and obtain information on just about anything from a variety of sources.  Likewise, there are several articles on the Internet regarding what UETA is, what E-Sign is, the states that have adopted it, as well as, the differences between the two. These are two very important pieces of legislation validating E-Commerce.

As you can see this is a complicated matter and could have grave consequences on your daily life as an insurance agent.  This article is not meant to offer legal advice or opinions on this subject.  Yet, I felt the topic was important enough to attempt a layman's explanation of its effect.  Since this article is seen and read in over 40 states, you need to get a legal opinion from your own attorney and your state's Department of Insurance.

In my opinion, this new E-Sign law paves the way for the truly Paperless Office and opens the door that automation has long needed to be complete.  Anything that makes you more productive, and automation will do just that; will make you more profitable in the long run.

Remember, "Automation equals Productivity and Profitability."

Editor's note: A tip of the FYI hat and thanks to Alan. He may be contacted at the following: