The road to widespread acceptance for e-signatures among carriers has been a long and rocky one. But, with legal, technological and cultural issues largely resolved, forward-thinking organizations are employing e-signatures to achieve straight-through processing and a competitive advantage. Massachusetts mutual Life Insurance Co., Springfield, Mass., plans to launch e-signature technology early next year as part of its efforts to dramatically improve the customer experience - for both its agents selling policies and its policyholders.
Initially, the carrier will use the technology for new business as part of its straight-through processing (STP) initiative. But it may subsequently roll out the technology for customer service after the policy is issued.
MassMutual joins a growing wave of insurers that have warmed to e-signatures. "If you truly believe that straight-through processing is all about getting to a paperless electronic submission world, you have to realize you can't do it unless you have an e-signature solution," says Hector Maury, VP of agency operations, U.S. insurance group, MassMutual. "If you try STP without e-signature, it is like having a race car without tires at the start line. You aren't going to get very far. So, without an e-signature solution attached to your STP, I am not sure how you can achieve a true paperless environment and be able to achieve the goals of cycle time and not-in-good-order application submission reductions."
A PROPITIOUS MOMENT
While Prudential, American General Life and Accident Insurance Co. and a few others adopted e-signatures about a decade ago, only in the past year or so has there been a groundswell of interest in the technology from carriers. Not only have insurers recognized its importance to achieving STP, but they have been swayed by the vast improvements in e-signature technology and the competitive pressures by other firms adopting e-signatures. Additionally, with more than 50% of business originating online, carriers want to fully serve customers in their preferred channels.
"I view e-signature as something that insurers, and life insurers, particularly, are finally ready for," says Steven Leigh, principal analyst, industry advisory services, insurance at Gartner Inc., an IT research and advisory company based in Stamford, Conn. "There is enough legal precedent, there is enough acceptance and the vendor maturity is there."
An e-signature-friendly legal precedent was set for insurers last November when a court ruled in favor of Time Insurance Corp. in a lawsuit filed by a policyholder who had allegedly included false information on an application he signed electronically. (For more, see "Scent of Success in Court".) This has helped ease the concerns of players crucial for buy-in. While three to four years ago carriers' corporate law departments and compliance groups were frequently skeptical about e-signatures, "they have gone to school on e-sign [i.e., e-signatures] and they are not the impediments," notes Patrick Hatfield, a partner in Locke Lord Bissell & Liddell LLP, and co-chair of the Atlanta-based law firm's technology transactions group.
REDUCED TRANSACTION TIMES
With e-signature capabilities, insurers hope to greatly reduce their "cycle time," or how long it takes for consumers to get the insurance policy in their hands after purchasing it. Today, this can take from three weeks to 45 days, a time MassMutual wants to cut by two-thirds by using the ApproveIt enterprise platform from Montreal, Quebec-based Silanis Technology Inc., a digital and e-signature solution provider. Such efficiencies can lead to a growth in application submissions, policy placements and, ultimately, the company's participating policyholder base, Maury says.
Amica Life Insurance Co., Lincoln, R.I., slashed transaction times with e-signature technology from Seattle-based vendor DocuSign Inc. that it first implemented in the spring of 2006. For instance, when the carrier issues a policy, it often needs to get other requirements, such as an amendment to the application or a credit card authorization signed. Previously, it completed such a transaction by mail in an average of 14 days. Now, with the e-signature, it completes this in two days. "In terms of getting the coverage in force and getting the case out of our queue, it really sped things up," says Duncan Hannah, assistant VP, Amica.
LOWER COSTS
Carriers are attracted by the ability of e-signatures to improve ease of doing business by reducing not-in-good-order (NIGO) submissions. Some 50% to 75% (as an industry average) of applications submitted to a home office by agents are incorrect or incomplete, notes MassMutual's Maury. This delays the time it takes for a policy to get into a policyholder's hands.
An insurer should design its e-signature process so that a policyholder cannot click "submit" until all forms required to be signed or acknowledged, and all fields required to be completed have been completed, Hatfield says. Such measures can reduce the number of NIGO applications, and ensure that the consumer isn't pestered by follow-up questions.
"That can generate tremendous savings for the insurance company, and improve the customer experience tremendously," he says.
Insurers also can forge stronger relationships with their agents when offering an e-signature solution, says Guido DiGregorio, chairman and CEO of Communication Intelligence Corp. (CIC), an e-signature solution provider based in Redwood Shores, Calif. "They get paid a lot quicker," he says. "If you can sign a customer up quicker, you get your check quicker. So somebody is going to get paid a week or two earlier for sure, and in some cases three weeks earlier."
COMPLIANCE AND GOING GREEN
E-signatures can be a boon to insurers in other areas, such as in increasing compliance and audibility - especially important in such a highly regulated industry. For instance, a carrier's terms and conditions are bound to its electronic form, and if somebody tries to alter one of the words, a big "X" or other mark is placed through the signature, says DiGregorio.
Maury believes that MassMutual's implementation of e-signatures will be better than paper applications for compliance reasons. "One of the beauties of automation is that you always have consistency," he says. "The evidence and the material we are going to capture is going to far surpass anything we would have in a pure paper world."
For instance, the carrier will capture the IP address from which an application was signed, and the e-mail address to which it was sent the signed application - information it normally does not have when papers must be signed. E-signature implementations are also part of the "green" initiatives of carriers. MassMutual is seeking to go paperless in order to conserve resources, in addition to boosting the ease of doing business and reaping cost savings, Maury says.
While most insurers are principally implementing e-signature technology for customer acquisition, they also can use it for claims (claim filing and proof of loss), underwriting (MIB and EFT authorization, approval and routing, and policy receipt) and other processes. An area they are increasingly tapping is customer service, where both the greatest opportunities and lowest risks lie, Hatfield says. With customer relationships already established, policyholders may want the added convenience of changing aspects of their policy, such as their address or the bank account from where the premiums are drawn.
Amica Life implemented e-signature technology beginning with customer service. For instance, a customer might call to request to change his beneficiary. Previously, Amica Life had to type it up in a form, send it out to the individual, and then have him sign it and send it back. Now Amica can just key it into the form, send it through DocuSign to the individual to sign and Amica gets it right back. "The whole transaction is completed in a much shorter timeframe, and there is less follow-up on our part," Hannah says. Amica Life is planning to integrate its e-signature technology, and may use it to trigger new business as well.
OVERCOMING CONCERNS
In spite of all the positives associated with e-signature technologies, some carriers are hesitant to come onboard, spooked by questionable e-signature vendor solutions of old. "Five years ago the notion of an electronic signature system was pretty scary," says Tom Gonser, founder and VP of product strategy for DocuSign. "It was digital certifications and installing software. It wasn't pleasant." In contrast, he notes the current technology is largely browser-based, so an insurer can send a contract and have it signed online.
The use of highly secure authentication such as biometrics and digital certifications never took off for customer-facing type applications because of their excessive complexity and cost for deployment in those situations, notes Michael Laurie, VP of product strategy and a co-founder of Silanis.
Insurers might be held back by other reasons. While some may start or continue e-signature projects during a recession to reap cost savings - especially if it is part of a larger STP project - others may stall plans since they're too strapped for capital. A majority of insurance companies (62%) were not using any form of e-signatures in their dealings with customers or agents, according to a December 2007 study by Craig Weber, SVP, Celent, a Boston.-based financial research and consulting firm. Since that time "we have moved the football forward, but we probably are not into first-down territory," Weber says, adding that the market crisis likely has thwarted insurers from undertaking non-essential major projects, such as e-signatures. Furthermore, some life insurers lack electronic applications, so have no need for e-signatures. "And creating an e-app is a pretty big undertaking," he says.
World Financial Group Inc. (WFG) talked about implementing e-signatures for a long time, but balked in part because life insurance submissions via the Internet are complicated due to the 50 different filing requirements for each state.
"We couldn't just single out certain states where it could be available, so we really did have to make it available in all 50 states," says Paul Mineck, VP of administration for the Duluth, Ga.-based insurer.
Though entrenched in an "old-school business, kneecap-to-kneecap, where paper and flip charts are used," WFG implemented e-signature technology from CIC a year ago, Mineck says, in order to make it easier for agents to do business with their clients, to enhance the relationship between its agents and product providers, and to better attract and retain life insurance associates.
The firm's U.S. rollout has gone so well that it now is looking at introducing the technology to its Canadian associates as well.
Still, carriers may find resistance from customers, at least at first, to e-signature technology, for some lack computers or simply want to receive policies via regular mail.
"If you ask the average person on the street to sign something electronically, if they haven't used it before, it sounds odd," Amica Life's Hannah says. "People are reluctant to commit to something they don't really understand." Consequently, Amica Life trains its sales agents to walk their customers as simply as possible through the process so that e-signatures seem "like the most natural thing in the world," Hannah says, noting that the sales individuals who have done so have experienced a very high rate of usage.
DIVERSIFYING OFFERINGS
Concerned about adoption, MassMutual is considering using different types of technology. It will begin with a Click2Sign implementation (See "e-Signature Example: 'Click2Sign'"), and at the request of its agents, it will consider providing signature pad technology for its financial services professionals. Some vendors have recognized the importance of diversity by being able to provide solutions that can accommodate different means of input.
Indeed, analysts such as Gartner's Leigh urge insurers to give customers their preference of one or more mediums (phone, Internet and paper) to execute transactions. That is, one client might want to contact the carrier by phone and obtain a policy online via an e-signature. Another, however, might call the carrier to ask to change the beneficiary on its policy, and might want to continue with a phone transaction.
Instead of saying, "Go to the Web site to do it," a progressive carrier will be able to say, "Speak your name and do a voice print signature over the phone."
Like Click2Sign technology, voice signatures are a low-tech but highly effective method, according to Celent's Weber. "It is very easy in a call center environment to record the call and memorialize the assent" of the policyholder, he says.
E-SIGNATURE EXAMPLE: "CLICK2SIGN"
A particularly popular technological option for insurers implementing e-signatures is non-hardware-dependent technology such as Click2Sign, according to Steven Leigh, principal analyst, industry advisory services, insurance, for Gartner Inc., an IT research and advisory company based in Stamford, Conn.
Typically, once the application is ready to be signed, the agent will send an e-mail to all of the people who need to sign it with a link to a secure Web server. There, after they authenticate themselves, they will see state-file images of forms. In the spot where they normally sign on paper, they will see a button on the screen that says something such as, "Click to e-sign." They then need only click that button to complete the transaction.
SCENT OF SUCCESS IN COURT
Insurers that have invested in e-signature processes and technologies were no doubt relieved to hear the decision late last year in Long v. Time Insurance. In the case, an Ohio court held in favor of Time Insurance based on the false answer by a policyholder to a medical question on the application. The insured had reviewed the application completely before his e-signature was affixed to it and submitted to the insurer.
The case arose after the Portland, Maine-based insurer denied coverage to the insured, who submitted a claim after having had surgery on a heart condition. The insured had not disclosed on the insurance application that he had been treated for a heart condition within the five years before applying for the insurance. For carriers, the decision was much-needed legal fodder in supporting the notion that they can use e-signatures for the completion of applications.
While courts hadn't previously addressed e-signature processes involving an insurance company, many disputes have been - and are likely to continue being - settled out of court.
"One insurer has been telling us that once they find someone who is involved with fraud, and their attorney confronts the guy's attorney or the individual with the data they've collected, in 100% of the cases the guy just gives up," says Guido DiGregorio, chairman and CEO of Redwood Shores, Calif.-based Communication Intelligence Corp. "He says in the face of that kind of data there's no way he can win."
Courts have started to admit electronic records and are not questioning their reliability, says Michael Laurie, VP of product strategy and a co-founder of Montreal, Quebec-based Silanis. "What does get questioned is the process." For instance, a plaintiff might say that although they e-signed, they did not understand the process or didn't sign a particular document.
Therefore, insurers need to design e-signature processes that, for instance, provide a number of consumer disclosures and ensure they have evidence that is admissible into court to prove the contract.
"Over the years, courts and lawyers across the country have become smarter about ways to challenge electronic records," says Patrick Hatfield, a partner in Atlanta-based Locke Lord Bissell & Liddell LLP, which provides advice to carriers on what constitutes an effective e-signature process. "So the challenge for an insurance company is to design an e-sign process that will secure the documents after they are signed, archive those documents in a secure fashion, be capable of retrieving those documents in order to admit them into evidence, and then have a credible custodian who can say under oath, 'These are the documents that were signed or presented, and here is how I know that these documents are the ones presented and how I know they haven't been changed.'"
While the current jurisprudence, including the Time Insurance case, looks favorable for insurers, they "may want to hold off on the high-fives," according to an analysis by Locke Lord Bissell & Liddell. In the Time Insurance case, "the insured appears not to have challenged the integrity or admissibility of certain e-records relating to the application signature process," the law firm notes.
Daniel Joelson is a freelance business writer based in Alexandria, Va.
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