Below, are some of the key takeaways that I got from the Locke Lord report:

• Both the federal ESIGN law and UETA, the state model law adopted in 47 states, permit the use of electronic signatures, electronic delivery and electronic records to satisfy the “in writing” legal requirements for transactions and permit companies to satisfy statutory record retention requirements solely through the use of electronic records.  The law firm’s report describes these two laws and how they interrelate when both are in effect in a particular state.

 

• The report contains a very helpful glossary that defines both electronic signatures and digital signatures.  “Electronic signature” is the better term to use when referring to a consumer’s signing a document online, because a “digital signature” can also mean a method by which two devices establish a secure, recognized connection.

 

• ESIGN & UETA permit the use of electronic signatures and electronic records even for “special consumer disclosures,” which are those contained in the insurance code that specify that the disclosure be made to the consumer in writing and be signed by the consumer (such as disclosures about uninsured/underinsured motorist coverage).  ESIGN and UETA also require that the electronic record of these “special consumer disclosures” be provided or made accessible to the consumer for later reference.

 

• The statutes require that the party initiating the e-signature and or e-delivery obtain both the consent of the consumer to complete the transaction electronically and the consent to receive disclosures electronically.  Several states also require that the consumer reasonably demonstrate the ability to open an electronic record in the case of “special consumer disclosures,” so it is a good practice for the agent to determine this with the consumer at the time the agent receives the other consents from the consumer. 

 

• In addition to getting the consumer’s consent to sign a document using an electronic signature, agencies need to employ a process to authenticate the identity of the signer.  This is often done by requiring the signer to enter some information that only the particular consumer and agency know.  The agency’s electronic signature tool should also create an audit trail surrounding the signature process and apply a Tamper Seal to the electronic document upon signing, so that it cannot be altered.

 

• ESIGN & UETA only provide legitimacy for electronic signatures, e-delivery and electronic documents.  All of the other requirements relating to the execution of documents contained in a particular law must still be satisfied (e.g., requirement to verify or confirm consumer’s receipt, requirement that a certain election be made before completing an application, etc.). 

 

• ESIGN and UETA allow companies to store electronic records in place of paper to satisfy their legal requirements to retain records in writing, provided the electronic records are stored accurately and are accessible on a timely basis to all persons who are legally entitled to access such records. 

 

• Agencies and other companies that retain electronic documents are going to have to meet the same evidentiary tests that they must meet for written documents in order for them to be admissible in court.  The report lays out these tests and agencies should carefully review them to make sure their “records custodian” with first-hand knowledge of their processes can testify that their electronic signatures and electronic documents meet each of these tests (p.7).
 
• ESIGN and UETA delineate a few types of documents as exceptions where electronic documents are not given legal recognition.  The exceptions pertinent to the insurance business where the notices may not be given solely via e-delivery are ones for termination of health insurance or benefits of life insurance (excluding annuities).  Also, the statutes do not provide legal recognition to electronic signatures and electronic records relating to wills, codicils or testamentary trusts.

 

• The report then includes a number of helpful “best practices” for agencies and carriers to consider as they design and implement effective electronic signature, e-delivery and electronic archival processes in their firms (p.7).

 

This ACORD commissioned report can be a helpful catalyst for your agency or company to support and implement these new tools and workflows into the independent agency distribution system, so that we can continue to enhance our efficiency and deliver a better customer experience.