P & C Industry Still Prefers the Dotted Line

If insurance carriers follow through with the frenzy to “go green” in the coming year, one of the beneficiaries will be the vendors that provide electronic signature solutions to the industry. “The green movement is ramping up exponentially,” says Karen Pauli, senior analyst in the insurance area for TowerGroup. “I've been stunned at how quickly it's happening. We identified it as a 2008 business driver, and it is happening fast.”

Pauli recently authored a report on electronic signatures and secure forms in the insurance industry and believes e-signatures offer the perfect complement to insurers looking to rid themselves of the paper they are using. “As the vendors get more active evangelizing their message and the demand for getting rid of all that paper increases, I think in the next 18 months you will see a huge up-tick in [e-signatures],” she says.

Document management and imaging have made huge strides this decade, but Pauli asserts carriers have work to do. “It's still in process for so many places,” she says. “But it is a focus area.” A secure e-signature solution eliminates some of the need for imaging, adds Pauli. “Depending on how critical the document is from a legal standpoint, a secure document initiative with a required electronic signature is the way to make it a defensible situation when [insurers] go to court.”

Another reason for the lack of movement in this area is carriers want to hold on to the tradition of a wet signature. “[Insurers] don't understand the body of legislation out there that facilitates a non-wet-signature environment,” she says. “They are comfortable with the fact there are 150 years' worth of law behind the wet-signature issue and only a couple of years behind electronic signatures.”

The issue of case law is more of a problem for regional carriers, she points out. Because cases have yet to be tried in all 50 states over this issue, Pauli explains, regional carriers would like to see cases go to court in the states where they operate. Despite the minimal number of cases involving e-signatures, Pauli believes decisions have been conclusive. “People need to understand when there is this level of national adjudication, they have to get over the belief it has to be [tried] in their particular state,” she says. “It's gone to court for other parts of financial services, but the insurance industry is risk averse and conservative. It is more comfortable doing things the old way.”

Some carriers have been scared off e-signatures through earlier use of systems that were not of the enterprise variety. For example, Pauli remarks, a business unit may have purchased an electronic-signature solution and failed to share it with other units. “You get one person using it, and you end up with problems across the organization because you have someone out of sync with policies and procedures,” she says. “One siloed group buys it and can't get adoption. It fails, and you get a bad rap on a good technology. The decision to use this–because you are impacting agents, employees, and other technology–really needs to be done for the whole organization.”

Despite the fact the Internet has turned into an electronic marketplace, Pauli believes carriers continue to wrestle with the issue of legacy systems and mainframes. Dealing with legacy issues and mainframes is expensive for insurers–both in cash and human resources.

E-signature solutions currently are not on the radar for many companies, according to Pauli, because they are focused on trying to deal with legacy issues or bringing in new administration systems. She indicates e-signatures should sit right along with other initiatives when carriers bring in claims administration systems or policy administration systems and where carriers are rearchitecting away from the old back-end systems. “All this document work is being done now,” says Pauli. “Carriers need to stop doing old-document initiatives where you automate standard forms and get it into a secure document initiative.”

Vendors have not revealed costs for e-signature solutions to Pauli, but she suggests there are ways to make the change in an affordable fashion. Hosted solutions always are relatively inexpensive, she points out. Vendors also price on a size basis. Still, cost shouldn't be the determining factor. “If you are doing a document initiative, why do it halfway?” she asks. “Why not do it all the way and get the full benefit?”

Carriers should look to a secure e-signature solution as a tool in the never-ending battle against insurance fraud. “It definitely solves some of the fraud problems out there,” she says. “You secure the application process with an e-signature so people can't claim they have submitted an application at a time when they didn't,” she says. “E-signatures require people to identify who they are. People who are fraudsters are sitting in a fake location; if they get into electronic security issues, they are going to stop the transaction. They are going on the path of least resistance. It's a big key to reduce fraud.”