Electronic Signatures – Time for Insurance Brokers to Put Away their Pens?
Insurance brokers looking to cut down on their overhead and make things easier for their customers are going to have to start accepting e-signatures. By allowing your customers to make binding agreements without the need for a physical signature you should be able to reduce the amount of paperwork and postage used in your brokerage dramatically. It should also mean faster turnaround times on all policies.
We know that a lot of brokers already accept e-signatures but for those still holding out against the tide – here’s the lowdown on e-signatures.
The Legal Position
The use of e-signatures in the UK was codified in the Electronic Communications Act of 2000. However, there was no real need to pass the law as British courts examine the purpose of a signature in an agreement rather than form of that signature. Thus, even before the act came into force; British law treated electronic signatures as both legal and binding.
Types of Electronic Signature
Electronic signatures in UK law cover a wide range of signature types and it’s worth understanding them in order to protect your brokerage as well as to deliver better clients services:
- Typing your name. It might sound a little too basic but there’s a precedent in law for this. In an industrial tribunal back in 1997 it was found that an e-mail exchange between an employee and an employer did amount to a change in contract terms – even though there was no physically signed document to this effect.
- Accepting a contract online. Clicking on a button to accept terms and conditions online is legally binding. There’s no “signature” at all in this instance but it is presumed to exist.
- PIN numbers. Personal Identification Numbers are the most common electronic signature in use in the UK. A PIN is considered legal authority to extract money from an ATM or to authorize a credit card payment.
- Biodynamics. This is a specialist area of e-signatures in which an electronic pen and pad are used to record the actions of a person signing. This recording can then be appended to documents to make them binding.
- Scanned signatures. It is perfectly acceptable to scan your signature and attach it to any document.
- Digital signatures. This may often offer a visual “signature” as well as an encrypted key for verification.
In general in the UK the courts have tended to agree that a signature is anything that demonstrates that a person intended to commit to the contents of an agreement.
As you can see it’s very easy for an electronic signature to be binding. However, there’s a genuine concern regarding possible fraud in many of these instances. It can be impossible to verify that the person signing the document electronically is really the named party.
That’s where electronic signature services come in. In general these are a low cost service where the individual’s identity and physical signature are verified prior to the e-signature being verified. Once the signature has been verified a digital signature is generated with both a public and a private key. These keys can be verified during the signing process to ensure that it is the individual named in the agreement who is undertaking that agreement.
Insurers should investigate these services for contracts with both customers and suppliers. A license for unlimited users and transactions in a month can cost as little as £50 a month. If you just want a couple of people in-house to manage supplier relationships using e-signatures you can spend much less than that.
The stronger the verification process – the more likely a contract is enforceable further down the line.