USE OF ELECTRONIC SIGNATURES  Return to Employee Section - Comply Page

Circular Letter No. 33 (1999)

                                                  November 4, 1999       

  RE: The Use of Electronic Signatures and Records in Connection With the Marketing and Sale of Insurance By Means of Electronic Commerce

      Advances in electronic technology are causing businesses, including those in the     insurance industry, to integrate various elements of electronic commerce into their     operations. In response to the demands of industry and consumers, New York State has     enacted the Electronic Signatures and Records Act ("the Act") as part of the State     Technology Law (Chapter 4 of the Laws of 1999) which was signed into law on September     28, 1999. The substantive provisions of the Act will become effective on March 26, 2000. 

     The Act creates a statutory structure in New York State that supports the use of     electronic signatures and electronic records in everyday public and business undertakings.

     With the enactment of the Act, certain insurance transactions may be conducted entirely   through electronic means.  The internet, and electronic commerce, have empowered consumers in the insurance     marketplace. Clear guidelines to facilitate paperless insurance transactions while  preserving and enhancing consumer and solvency protections are necessary for an     electronic insurance marketplace to succeed. The Insurance Department has conducted a     detailed survey of those provisions of the Insurance Law that may be impacted by the Ac t   and the use of electronic technology. This Circular Letter is intended to provide guidance to the industry, and to prompt discussions between the industry and the Department, in     regard to the marketing and sale of insurance electronically. As required by the Acting    Office for Technology, as the Electronic Facilitator, will promulgate rules and regulations   regarding entities’ integration of electronic commerce into their operations. 

     The great majority of existing provisions of the Insurance Law do not pose any impediment     to electronic commerce and do not inhibit the legislative intent to place electronic     commerce on the same legal ground as paper commerce. An insurer should, however, refer to the applicable law, rules, and regulations when it seeks to integrate elements of electronic commerce into its business operations. It is the Department's interpretation that:

  Statutes that utilize the words "writing", "certificate", or   "memorandum", or the like, permit electronic  documents. 

 Statutes that require that a document be "signed"  permit electronic signatures. 

  Statutes that provide for "delivery", "notice", or the like,  permit electronic communications. 

 Regulation 152 (11 NYCRR 243), governing records  retention by insurers and certain other entities, is not   affected by the Act and continues to be applicable. 

 Formatting requirements prescribed by statute,   including pagination, type size, print color or that certain language be conspicuous or be placed in a certain location within a document, may be met  electronically if the sender and recipient of the  electronic document utilize a computer technology that ensures the creation, transmission, and receipt of a           document equivalent to that prescribed by statutory  formatting requirements. (Factors that may be considered include uniform display of the document and technology that precludes the alteration of a document.)     Insurers are encouraged to discuss with the Department how these statutory requirements may be  satisfied.

  However, there are certain statutes that contain additional requirements that, without     amendment or further regulatory interpretation, may present obstacles to electronic     commerce, e.g., the use of a "seal" or "notary" with a writing, United States mail, and     statutory cancellation notice requirements.

 Insurers should be aware that Section 109 of the Act provides that the use of electronic     records and signatures is voluntary and that "…nothing in this article shall require any     entity or person to use an electronic record or an electronic signature unless otherwise     provided by law." Thus, if any one party to the transaction does not wish, or is not able, to   participate fully in an electronic transaction, such party cannot be required to do so.    Accordingly, it may be advisable to obtain the consumer's consent to carry out insurance     transactions electronically. Whether or not obtaining consent is appropriate will depend     upon the nature of the particular transaction. 

The Insurance Department encourages insurers to carefully review the Act and other laws     and to consider integrating the use of electronic signatures and records into their     insurance business in New York State. Insurers should develop responsible strategies to     address the issues inherent in the conduct of insurance business electronically. Insurers     that wish to incorporate the use of electronic commerce should conduct their own legal     and technical computer reviews. Insurers may also wish to review their current policy     forms and procedures to determine whether they need to be revised to accommodate     electronic commerce. The insurance industry should also be mindful that there are     emerging issues involved in the conduct of business electronically which will only be     clarified over time as the result of court decisions and administrative actions. These issues     include, among other things, security, privacy, and jurisdictional matters, including those   involving the location of business conducted electronically for purposes of licensing. We   look forward to facilitating a dialogue between consumers, producers, underwriters and the Department which will result in greater market access for the consumer.

Any questions regarding interpretation of the Insurance Law in connection with the     implementation of electronic commerce are to be directed to Kevin M. Rampe, Esq.,     Deputy Superintendent and General Counsel or Audrey Samers, Deputy General Counsel,     at the address set forth above.

                                         __________________________

                                                Neil D. Levin

                                          Superintendent of Insurance         ____________________________________________________________________________________________

  The term "electronic signature" is defined in Section 102(3) of the Act as  "…an electronic identifier, including without limitation a digital signature, which is unique to the person using it, capable of verification, under the sole control of the person using it, attached to or associated with data in such a   manner that authenticates the attachment of the signature to particular data and the integrity of the data transmitted, and intended by the party using it     to have the same force and effect as the use of a signature affixed by hand."

This letter was sent to:

       All licensed life insurers, fraternal benefit societies, charitable and segregated gift         annuity societies, employee welfare funds, retirement systems, viatical settlement         licensees, governmental variable supplements funds, savings bank life insurance         departments, property/casualty insurers, co-operative property/casualty insurers,         financial guaranty insurers, mortgage guaranty insurers, title insurers, reciprocal         insurers, accident and health insurers, Article 43 corporations, municipal cooperative health benefit plans, and rate service organizations; State Insurance  Fund; Medical Malpractice Insurance Association; New York Property Insurance  Underwriting Association; Motor Vehicle Accident Indemnification Corporation;  Excess Line Association of New York; registered risk retention groups, service  contract providers, and Public Health Law Article 44 health maintenance  organizations and integrated delivery systems; and accredited reinsurers.