Do E-Signature Benefits Outweigh the Risks?
Boston — E-signature adoption is picking up steam, although this transition has taken much longer than initially expected, according to a new report, "An E-Signature Update for US Insurers" from Celent LLC, a Boston-based financial research and consulting firm.
However, in a previous Celent survey, 62% of respondents said their companies were not using any form of e-signatures in their dealings with customers or agents. By line of business, 59% of commercial lines P&C respondents, 75% of personal lines P&C respondents, and 47% of life and health respondents said they were not using any form of e-signatures in their dealings with customers or agents.
Celent believes that the majority of Tier 1 through Tier 3 carriers will put e-signatures in production for at least some business processes within the next 24 to 36 months. Carriers that are waiting for early adopters to work through any remaining issues before they would consider offering e-signature capabilities need to plan for this shift.
"There are tons of success stories out there," says Craig Weber, managing director of Celent’s insurance practice and author of the report. "But many carriers have been slow to give their agents and customers an e-signature option, which severely constrains the value of any electronic processing of new business or service requests."
"The benefits of e-signatures are too compelling to ignore," Weber says. About 80% of survey respondents ranked improved process speed and the opportunity for improved process efficiency as compelling potential benefits.
Silanis Technology Inc., a St. Laurent, Quebec-based e-signature and records solution provider, adds a number of other benefits:
* Maintain control of, and visibility into, processes
* Collect, store and analyze more evidence data points than paper
* Automatically detect even minor tampering with records
* Reduce errors by automating document QA
* Enforce workflow rules to meet compliance requirements
* Provide alerts on suspicious or non-compliant records
In contrast, according to Silanis, the risks of an improperly evidenced electronic process are many, and can include financial losses, damage to an organization’s corporate image and shareholder value, loss of intellectual property, disrupted business and increased liability.
During Lord, Bissell & Brook LLP’s Electronic Signatures & Records Summit in Chicago in September 2007, many presenters touched on the five important risks of e-signatures, and Todd Silverhart, corporate VP and director, Technology in Marketing and Distribution Research and Markets Research at LIMRA International, shared ways carriers minimize these risks.
Authentication Risk — How do we prove who signed?
* ID checks
* Put it in the hands of producers
* Combination of personal questions and unique PIN
* Future contact with potential insured for underwriting, including tests, ensures additional authentication
Repudiation Risk — How do we prove it’s the same document?
* Updates mean signing process must start over
* Issue department only handles electronic forms
* Signatures are locked down and encrypted
* E-app can’t be unlocked without PIN
Compliance Risk — Are all compliance rules satisfied?
* Avoid technically complicated products
* Attach all required forms
* Involve legal and compliance departments
* Use set business rules
Adoption Risk — Will the new process be adopted?
* Involve users early on
* Start small
* Provide pre-training and post-implementation support
* Communicate security of channel
* Consider incentive programs
* Be flexible
Relative Risk — How does it compare to the traditional method?
* ow levels of risk in the other categories
* Training
* Checks and balances
* Maintain a standardiz d environment
These risks may contribute to why insurers are hesitant to adopt e-signature processes. In fact, 63% of respondents to Celent’s survey called e-signatures a "nice-to-have" today.
Though a majority of carriers have not yet implemented a single e-signature option for agents or customers, Celent believes that the majority of Tier 1 through Tier 3 carriers will put e-signatures in production for at least some business processes within the next 24 to 36 months.
Agent-based and direct/online applications for insurance were rated as Highly Likely or Somewhat Likely areas for e-signature implementation in 2007 or 2008 by 58% and 46% of respondents, respectively. For 2009 and 2010, anticipated use of e-signatures in these areas was even higher.
Sources: Celent LLC, Silanis Technology Inc., INN archives
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