Best Practices for the Adoption of eSignatures in P&C Insurance

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TABLE OF CONTENTS Executive Summary

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Legal Overview

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What Are eSignatures?

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Why Use eSignatures?

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Use Cases for eSignatures

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Researching eSignatures

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Implementation Best Practices

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Conclusion

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Execu t ive Su m m ar y Across the insurance industry, brokerages and insurers are moving to adopt electronic workflows in place of paper-based processes ? indeed, doing so is "table stakes" for remaining competitive in today?s market. eSignatures are a key part of the paperless process, with numerous solutions on the market that provide benefits including: - Reduced costs - Faster processing - Increased security - Minimized risk The rise of eSignatures within the broker distribution channel, then, is hardly a surprise.

The process of signing insurance documents, while just a formality, can be enormously time-consuming and prone to error when done on paper. Customers often procrastinate, return incomplete documents, encounter technical difficulties with their computer, fax machine or scanner, or must inconvenience themselves by making a trip to their broker?s office. The amount of time brokers spend following up on late or erroneous applications over the course of a year could be spent much more productively.

For insurers, eSignatures provide confidence that the insurance documents provided by their brokers are secure and authentic, and have the ability to increase retention through a more streamlined customer experience.

To promote the adoption, acceptance and implementation of eSignatures across the broker channel, this white paper will outline: - legal overview - definition of eSignatures - overview of eSignatures technology - eSignatures workflow - research tips - implementation best practices

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Legal Over view ESIGNATURES ARE LEGAL Electronic signatures are legal, recognized by federal and provincial e-commerce laws as equal to paper and ink signatures. These e-commerce laws have three main characteristics: - They recognize that electronic signatures and records cannot be denied legal effect simply because they are electronic - They are technology neutral, permitting electronic signatures without specifying any form of technology - They apply to all existing laws (including insurance) In other words, eSignatures are permitted except where specifically prohibited. At the federal and provincial level, e-commerce laws generally prohibit electronic means in five key areas, while insurance laws impose additional restrictions. Common restrictions* are:

Rest r ict ion s Un der E-Com m er ce -

Wills / codicils Trusts created by wills / codicils Powers of attorney Negotiable instruments Land transfer / registration

Rest r ict ion s Un der In su r an ce -

Notice of cancellation Certain alterations to policy by insurer Trustee appointment Beneficiary designation Nomination of person as having rights / interests of insured on insured?s death

For all other types of insurance documents, eSignatures are recognized under the law as being equivalent to a wet-ink signature. Note that customers must consent to signing electronically and receiving an electronic copy in place of paper; typically, eSignatures solutions will obtain this consent before proceeding with the signature process.

To learn more on this topic, read the CSIO eSignatures Advisory Report prepared by national law firm Fasken Martineau LLP, available at: www.csio.com/esignatures. *Restrictions vary by province; an e-commerce lawyer practicing in your jurisdiction will be able to provide up-to-date information on the restrictions that apply in.

Wh at ar e eSign at u r es?

DEFINITION For most of us, our ?signature? is a visual representation of our name written in cursive by our own hand.

However, from a legal perspective, a signature (electronic or otherwise) is simply a record of someone?s intent ? the proof that a specific person knowingly gave their consent. In that sense, the form that a signature takes is simply a matter of technology, whether paper and ink or electronic code.

Signature applied by tracing with a computer mouse, fingertip on a touchscreen, or stylus, or embedding an image of a scanned signature

Signature applied by clicking/tapping on screen

Signature applied by typing name

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Wh at Ar e eSign at u r es? (con t 'd) What sets eSignatures apart from scanned, faxed, or even original paper-and-ink signatures is that an eSignatures solution incorporates evidence into the finalized document, providing all parties involved with assurance of that document's authenticity, satisfying the ?Three I?s? of contracts: - Identity ? that signers are who they say they are - Intent ? that each signer intended to sign the document - Integrity ? that the document is authentic We will return to these concepts throughout this white paper, illustrating the degree to which eSignatures and paper-and-ink signatures satisfy the Three I?s.

TERMINOLOGY: ESIGNATURES VS DIGITAL SIGNATURES eSignatures solutions all perform the same task: capturing a user?s signature and embedding it into an electronic document in a way that provides confidence in the authenticity of that document. When researching eSignatures, however you may come across two terms that, while often used interchangeably, are not the same thing: electronic signatures and digital signatures.

The basic technology is electronic signatures: electronic information that a person creates or adopts in order to sign a document and that is in, attached to or associated with the document. To provide assurance that the signed document satisfies the Three I?s (Identity, Intent and Integrity) of contracts, eSignatures solutions will incorporate an audit trail into the finalized document. The audit trail shows the evidence gathered by that solution, proving who interacted with that document and when:

Docu m en t Au dit Tr ail

To provide added integrity, many eSignatures solutions retain an authoritative copy of the signed document that may be accessed in the event of a dispute.

Some eSignatures solutions also incorporate digital signatures: encryption technology that secures a document from tampering. Documents with a digital signature will have a symbol at the top indicating its encryption status:

e-sign ed docu m en t w it h valid en cr ypt ion

e-sign ed docu m en t w it h in valid en cr ypt ion

Both electronic signatures and digital signatures satisfy the Three I?s of contracts, and therefore are equally valid means of obtaining a signature electronically. Digital signatures merely provide added confidence in the third ?I? ? a document?s integrity.

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Wh y Use eSign at u r es?

BENEFITS OF ESIGNATURES Paperless, secure and convenient, electronic signatures enable customers to sign documents electronically on computers and mobile devices in a single step. The resulting transactions are fast, secure, verifiable and paperless, improving customer service while reducing costs for brokers. eSignatures solutions do not require brokers, insurers or customers to download any special software.

The signing process takes place entirely within an Internet browser, enabling anywhere, anytime signing of insurance documents for both personal lines and commercial lines customers who may not have ready access to a printer, pen, and scanner or fax machine.

BENEFITS OF ESIGNATURES

CUSTOMER BENEFITS

BROKER BENEFITS

INSURER BENEFITS

Im pr oved con ven ien ce an d exper ien ce

Abilit y t o in it iat e an d com plet e sales cycle qu ick ly an d ef f icien t ly

Digit al validat ion an d au dit t r ails det er con t r act dispu t es f r om r each in g cou r t

Sign by m ou se or t ou ch scr een an yw h er e, an yt im e, sim ply w it h em ail an d an In t er n et br ow ser

In cr eased r et en t ion t h r ou gh im pr oved cu st om er con ven ien ce

Tam per -pr oof r ecor ds

Elim in at ion of pr in t -sign -scan pr ocess

Redu ced er r or s an d f ollow -u p calls

Im pr oved com pet it ive posit ion again st dir ect w r it er s

En f or ce w or k f low r u les Avoid er r or s an d om ission s M an y BM S plat f or m s in t egr at e w it h eSign at u r es Paper less w or k f low ef f icien cy com plem en t s ben ef it s of eDocs an d CSIOn et

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Wh y u se eSign at u r es? (con t 'd) When comparing the workflows of obtaining a signature with paper or electronically, the benefits become even more apparent ? both from the perspective of convenience and in satisfying the Three I?s:

Wor k f low w it h ou t eSign at u r es

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Wh y u se eSign at u r es? (con t 'd)

Wor k f low w it h eSign at u r es

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Use Cases f or eSign at u r es Outside of the exclusions noted above, eSignatures may be used for virtually any form, contract or business process that requires a signature ? including for internal purposes unrelated to selling and servicing insurance policies. Common use cases include: - New policy applications (Personal and Commercial Lines, including Farm) - Options forms (Un/Under-Insured Motorist) - Policy delivery - Renewals - Disclosure delivery - Policy servicing - Agent licensing and appointment - Claims - Group benefits - Internal processes: HR, legal, procurement, vendor contracts - Re-insurance In most cases, brokers will use an eSignatures solution to obtain a customer signature, while insurers will simply review the completed document to ensure its validity.

Resear ch in g eSign at u r es BUILDING THE ROI With any new technology, the question of cost is important. However, of equal importance is the cost of not implementing. Industry estimates put the cost of each paper signature at a low end of $6.50 and as high as $20 USD. In fact, spending as little as 3 hours per week on tasks associated with obtaining paper and ink signatures (e.g., preparing documents, following up on incomplete/incorrect documents, sending reminders, filing, etc.) could cost as much as $3,000 per year. With eSignatures, those same costs fall to as low as $300.

To calculate the potential savings in your brokerage, visit the CSIO eSignatures Savings Calculator: w w w.csio.com/esig-calculator CSIO has researched a number of eSignatures solutions against legal and operational criteria to develop the eSignatures Vendor Dashboard, a research tool to support the broker channel in adopting this important technology. To view the dashboard, visit: www.csio.com/esig-dashboard

Tim e t o com plet e in su r an ce applicat ion : Paper 45 Days

eSign at u r es 10 m in

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Resear ch in g eSign at u r es (con t 'd) KEY CRITERIA FOR BROKERS AND INSURERS

Br ok er s: Cr it er ia f or Adopt ion of eSign at u r es

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In su r er s: Cr it er ia f or Accept an ce of E-Sign ed Docu m en t s

Meets legal and technical requirements set out in the CSIO eSignatures Advisory Report Provides options for verifying identity of customers (e.g., email, secret question, SMS passcode, etc.)

Provides evidence of what each signer sees, signs and agrees to online (intent and integrity) Flexible workflows to suit your brokerage Supports use of brokerage branding, colours and marketing material Addresses both in-person and remote signing Supports any web-enabled desktop computer or mobile device Investigate whether your BMS integrates with any eSignatures solutions, or if your professional affiliations offer discount pricing

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Verify that documents are correct and complete If electronic signatures, inspect audit trail for evidence of signature by the appropriate parties If digital signatures, inspect encryption status at top of document to verify integrity (see Electronic vs.

Digital Signatures above)

Im plem en t at ion Best Pr act ices Implementing any new technology can be a daunting prospect, but by following these best practices, you can smooth your company?s path to full adoption: 1) SELECT THE ESIGNATURES SOLUTION THAT M EETS YOUR NEEDS Many eSignatures vendors offer a trial period, providing you with the opportunity to familiarize yourself with how various solutions perform from both the broker and customer perspective, and select the one that meets your business needs.

2) DON?T PRIORITIZE INTEGRATION WITH YOUR BM S While integration between BMS platforms and eSignatures vendors is the ideal, most convenient implementation, it is not a prerequisite. Typically, integration simply streamlines the workflow of uploading a document to the eSignatures solution. Doing so manually is a simple task that has little to no bearing on the savings brokers will realize through implementation.

3) GENERATE EM PLOYEE BUY-IN Open, effective communication with employees about why you are adopting eSignatures is often essential to a smooth implementation process. Tips include: - Communicate with employees beforehand on the business reasons for adopting eSignatures - Demonstrate the technology from both the broker and customer perspective, showing the benefits over paper - Identify tech-savvy employees to receive advance training on eSignatures so they become in-house experts and champions to whom other staff can turn for assistance - After a familiarization period, require that all signatures be obtained electronically unless the customer requests otherwise 4) APPROACH INSURERS WITH CONFIDENCE The law recognizes eSignatures as equivalent to paper and ink signatures ? therefore, unless broker contracts with its insurers specify a requirement for paper, eSignatures are a valid means of obtaining customer signatures.

5) ENSURE SECURITY REQUIREM ENTS ARE M ET Every eSignatures solution on the CSIO eSignatures Vendor Dashboard meets the baseline legal and security requirements for the Canadian insurance industry, but your company or its business partners may have additional concerns (such as server location).

Identify these concerns in the research phase and contact the vendors under your consideration to ensure they are addressed.

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Im plem en t at ion Best Pr act ices (con t 'd) 6) FOCUS ON INVESTM ENT, NOT COST Simply put, the benefits of eSignatures far outweigh the ? typically modest ? cost of implementation. eSignatures are an investment in not only workflow efficiency and internal savings, but in customer service as well. Providing an electronic option is a signal to customers that your company is modern, in touch, and capable of meeting their needs.

Con clu sion eSignatures technology has been recognized as legal, reliable and cost-effective in many industries, including financial services and real estate, as a way to improve the customer experience by making obtaining signatures as easy and convenient as possible. Adoption of eSignatures by the insurance industry has already begun, improving the consumer?s ease of doing business within the broker channel and strengthening its competitive position.

For questions, advice or to provide any comments on the material outlined in this white paper, please email communications@csio.com.

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