Signatures slowing down insurance industry

(August 2007) It’s been said over and over again: The life insurance industry relies too much on paper, and not enough on technology. So what’s the holdup? How about handwritten signatures?

Every life insurance policy requires a handful of signatures, which traditionally means grabbing a pen and putting your John Hancock on paper. But Tim Fitzpatrick, president of VirtGroup, a Calgary-based company that provides an online distribution management system to the insurance industry, says handwritten signatures should, and can, be obsolete. “It’s one of the biggest misunderstandings in the world,” says Fitzpatrick. “The contract is just one piece of evidence of the agreement.”

Fitzpatrick, who spoke to CLIEDIS’s AGM earlier in the month about the need to move to electronic processes and do away with myriad signatures, says there needs to be evidence of an agreement. And while a “signature is pretty good evidence” it’s not the only way to document a deal.

“Have you ever signed anything for car insurance?” he asks rhetorically. “How many transactions have you done at the bank?” Fitzpatrick says many industries don’t require signatures to make a transaction, and believes the life insurance industry should follow suit. In fact, if any industry is suited for the post-signature world, says Fitzpatrick, it’s life insurance, because things rarely change. “Life insurance is completely fixed,” he says. “So we know the amount of death benefits.”

Part of the concern the industry has is people cheating the system. The logic is if there’s no signature verifying that a client told the truth on a policy, then what’s stopping them from lying? Fitzpatrick says that theory is ridiculous. “Anytime there’s been a situation where the company felt there was fraud, there’s always been a signature. If the insurance company has evidence of fraud, they won’t pay. If someone dies of cancer six months after buying a policy, they’ll look at the medical records which will say he had cancer and they won’t pay.”

So what’s the alternative? Victoria Prince, a lawyer at Borden, Ladner and Gervais, says electronic signatures, such as a “yours truly” on an e-mail, can work as well as a hand-written autograph. “Any symbol created electronically, which is intended to be a signature, is fine,” she says.

Like Fitzpatrick, Prince says an oral agreement can work, but that having something in writing is best. Most important, there needs to be proof that an interaction took place. “It’s always a question of proof,” she says. “If you send an e-mail that says, ‘I will buy your desk for $200,’ that’s an offer you’re making. If I e-mail back and say, ‘I accept,’ we now have an offer of acceptance.”

Even a simple icon where a client has to click can suffice, because, says Prince, “the basic idea is you’ve had to have notice of those terms and read them and agreed with them.” She encourages companies to be proactive — such as making the click box easy to find and giving people a way to exit a site if they don’t agree — when it comes to terms and conditions or other documents that need consent.

Fitzpatrick would like nothing better than to see the insurance industry change their attitudes toward signing documents, because if they can do that they’d be one step closer to abandoning paper processes altogether. “Basically, everything is a piece of paper,” he says. “When we have scanned applications they often run 20 pages. I’m proposing getting rid of paper. It’s just a question of saying how do we acknowledge that a person is telling the truth?”

This article first appeared in the August 2007 edition of Advisor’s Edge Report.

Filed by Bryan Borzykowski Advisor.ca, bryan.borzykowski@advisor.rogers.com