By Cyril Tuohy
For life and annuity carriers, the era of electronic signatures is at hand. Agents and carriers have come around to the advantages of signing on the dotted line in electronic form, particularly when it comes to new business.
The economic advantage of a legally binding electronic signature on a PDF or Word document is clear, said one prominent technology analyst. With state regulators giving their stamp of approval to the technology, there’s also little preventing its increased usage.
“With consumers and agents demanding that issuers move toward automated processes, and insurers seeing the benefits of automation in other industries as well as their own, life insurers are no longer holding back on implementing e-signature,” wrote Celent technology analyst Karen Monks in her most recent industry report.
Electronic signatures lower costs and shorten policy cycle times. The signatures are considered legally binding, and so a 100-page document can be sent, signed electronically and returned to a carrier over a computer without any need for physical paper.
Average new business unit cost per issued paper policy applications is as high as $446, according to Celent, but paperless transactions reduce the cost of documents and transmission to mere dollars or even cents.
Fax machines were once the de facto instruments for sending binding documents because of their ability to capture a signature. This is no longer so, even if business cards retain fax numbers of business contacts along with work and cell phone numbers.
In the last three years, the Internet has sped up the process of capturing signatures, and consumers now are signing off on retail purchases using mobile phones and tablets. These latest devices allow insurers of all stripes to close on policies faster.
In an April survey of insurers, 74 percent said their life insurance companies were using some form of electronic signature when doing business with agents and policyholders, Celent found. Contrast that with five years ago when more than one in two life insurers (53 percent) were not using any form of electronic signatures, Celent found.
Compliance and legal risks are still stopping some insurers – about 25 percent – from using electronic signatures. But that reticence is dissolving as “the market is leading to no other direction than into the automated world of e-signatures,” Monks wrote in her latest report out this month.
“Our research showed that concerns related to technology have diminished relative to years ago and now there are many vendors in the market offering secure e-signature technology,” Monks wrote in her report titled “E-Signatures in Life Insurance – A Vendor Spectrum.”
On average, life insurers use two electronic signature vendors in their operations, and two-thirds of life insurers deployed their electronic signature systems in a software as a service mode, Celent’s research found.
Nearly 60 percent of life insurers using electronic signatures integrated the software with a vendor’s system, not private labeled, Monks wrote.
Though carriers traditionally prefer deploying the electronic signature applications on a carrier’s servers behind a firewall, the Internet has given electronic signature vendors an opening to compete with signature applications residing on insurance company servers.
Electronic signature applications like EchoSign, AssureSign, DocuSign and SIGNiX are examples of software as a service-based solution.
Monks also found that signatures are most commonly used in writing new policies. Illustrations, electronic applications for life and electronic applications for annuities account for 70 percent of all electronic signature transactions within a life insurance company.
The most common method used to access documents to be signed is by email followed by an insurance company portal with a single sign-on, followed by a vendor-hosted application system. Policyholders are the most common users of electronic signature software followed by captive agents, the Celent research found.
Monks counts no fewer than 12 different ways to produce an electronic signature. The method considered the least secure is click-to-sign, in which a user clicks a button to accept an agreement or transaction. Yet this click-to-sign method, along with the safer electronic signature pad method, represents the most common approach to capturing an electronic signature, Monks wrote.
Moving through progressively safer signature strata are voice, graphic signature, user name and password, two-factor authentication, security questions, signature pads, handwritten mouse, digital certificate and biometric signature data, according to Celent.
Monks’ report identifies 16 electronic signature vendors targeting the North American life insurance market. “E-signatures are finally strongly in place in life insurance, and Celent expects the trend to accelerate over the next 18 months,” Monks wrote.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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