Let’s discuss the electronic delivery of insurance documents. Please don’t leave! I promise this will be painless (mostly). I know that the electronic delivery of insurance policy documents is not a new phenomenon. You probably have sent thousands of documents electronically. Why would you need to read an entire article on electronic delivery of insurance documents?
That is a good question. Let me answer that question with a question of my own: You may have sent thousands of documents electronically, but are you sure you did so correctly? While a federal law to address this issue passed in 2000, PIA Northeast still fields many questions each year on this topic. So, give me five minutes now—it could save you time and money down the road.
Chekhov’s federal law
The federal law—the Electronic Signatures in Global and National Commerce Act (E-Sign)—established the legal validity of electronic records and signatures. Since then, every state in the country has adopted laws that mirror E-Sign.
While E-Sign, and the state laws that it spawned, created the legal validity of electronic documents, they specifically do not require anyone to be forced to accept them. Instead, the law requires that prior to sending any insurance document to an insured, the insured must first give his or her consent to receive the information electronically. Not only that, but consent must be given in a specific manner.
Prior to sending any insurance documents electronically, agencies are required to provide their insureds with a consent statement to acknowledge. They are required to send the consent statement in a manner in which the future insurance documents will be sent. In English, this means if an agency is going to email information to the insured, the consent form should be emailed. If the information is on your agency’s website, then the consent form should be accessible there. This also means that perhaps paradoxically, a hardcopy consent form with a “wet signature” wouldn’t be valid.
The content of the consent statement needs to address the how, what and what-happens-when of electronic delivery.
The consent statement first needs to address how the insureds will access the electronic documents they will be sent. From a practical standpoint, this means that the statement should include information on any hardware or software necessary to access the electronic documents. This may include ensuring your insured has a valid email address, a reliable internet connection, and the ability to open PDFs. Remember, this requirement does not end when the notice is sent. Instead, an agency has an ongoing responsibility to notify the insured of any change in the hardware or software requirements needed to access or retain the electronic records. Any change in hardware and/or software triggers the need to send another consent statement.
Of course, the consent statement needs to provide more information than just hardware and software requirements. It also must serve to provide the insureds with information on what documents they are consenting to receive electronically.
Arguably, this is the most important piece of the consent statement. It provides the insured with key information, and it serves to protect the agency sending the information. Wording is vital—if an insurance document is not mentioned in the consent statement, then technically, it cannot be sent electronically. A poorly worded statement often leads to an agency sending multiple consent statements to an insured to make sure all relative documents are addressed.
For this reason, it is wise to word this section as broadly as possible to encompass as many documents as possible. An example of a sufficiently broad statement: “Your consent to electronic records applies to all policy documents, applications or any information related to your policy.”
While the purpose of the consent statement is to get an insured’s permission to send documents electronically, this notice also must address the insured’s right to withdraw that consent.
Under the law, insureds can withdraw their consent at any time. The notice must inform the insureds of this right, and how they can withdraw their consent. As an example, a statement like: “You may withdraw your consent to receive your records electronically at any time by sending an email to the following address …,” would sufficiently address this requirement.
Going hand in hand with the ability to withdraw consent, is a prohibition against being penalized for doing so. Specifically, if an insured opts to receive hardcopy documents, he or she cannot be charged a fee for those copies. This prohibition only applies to those documents that a producer would otherwise be required to furnish for free. Most policy documents would fall into that camp. However, if the producer is permitted to charge a fee for a document and the document is available electronically, but a paper copy is requested, a fee may be imposed. A common example of this practice would be providing certificates of insurance for clients.
But, wait there’s more!
We have been discussing the requirements of the initial consent notice, but the responsibility of the agency actually extends beyond. When a document is furnished electronically, the insured must be notified of the significance of the document, if it is not immediately evident. In addition, the insured must be notified of the right to request a paper version of the document.
When sending the initial notice or subsequent electronic documents, everybody in your agency should make sure they are documenting the steps they have taken. While not required by law, a good best practice is to request a return receipt on all electronic communications. This makes proving consent much easier if there is an issue down the road.
An engaging article on e-delivery of documents
While agencies have been sending documents electronically for years, 2020 was the year that delivering documents electronically went from a convenience to a necessity. The sheer volume of electronic communications now requires that agencies review their consent procedures from time to time to make sure they are in compliance with the law.
Spending a few minutes to make sure your electronic delivery procedures are sound will prevent many headaches later. As the father of American insurance, Benjamin Franklin said, “an ounce of prevention is worth a pound of cure.”
More resources for PIA members
PIA members can access the following resources in the PIA QuickSource library:
- Multiple state: Sample electronic delivery consent form.
- Multiple state: Do you have a procedure for handling emails from your clients?
- N.J: Rules on electronic transactions;
- N.Y.: Electronic delivery of insurance policies and documents via the internet; and
- N.Y.: Electronic signatures and records in New York state.
 Because all law titles need to have some clever acronym.
 I am using the term insured here as shorthand for any consumer to whom you would be sending electronic information.
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.