The insurance industry has been notoriously slow to fully embrace electronic forms of commerce and there may be good reasons for the hesitation. Until recently, antiquated, prescriptive requirements in the insurance laws hobbled the industry’s ability to step with both feet into the greener world of e-commerce and digital platforms.
Executive SummaryRecently updated insurance laws may not be enough for the industry to confidently go forward with electronic delivery, according to Susan Stead and Holly Wallinger of Bailey Cavalieri LLC. Among the obstacles is the fact that insurance laws lack clarity and uniformity regarding what is satisfactory "proof of mailing" for delivery of electronic notices, they explain, providing examples of state-by-state variations. There is also a lack of certainty in litigation when a carrier must prove that the cancellation or nonrenewal was effective.
Despite the easing of those requirements and the fact that most people carry their electronic mailboxes with them, there is still a paper bias that creates regulatory and legal risks for carriers. Until recently, insurers were required to provide cancellation notices and nonrenewal notices via the U.S. Mail or similar service. E-delivery was not an accepted form. Although those statutory obstacles have been eliminated in two-thirds of the states, these recently updated insurance laws may not be enough for the industry to confidently go forward with electronic delivery—at least not yet.
All states have either enacted the Uniform Electronic Transactions Act (UETA) or are subject to the federal Electronic Signatures in Global and National Commerce Act (E-SIGN). While those laws provide a safe harbor for electronic delivery of required notices, the problem is that both laws preserve existing state law delivery requirements, such as those requiring delivery by a specific method. For insurance, this means that insurers must continue to send required notices for cancellation and nonrenewal by “first-class U.S. mail,” “certified mail,” or by “U.S. mail,” depending on the state.