Electronic Compliance: A Feasible Goal?
Insurance Networking News, December 1, 2012
Following the Audit Trail
Audit logs play a key role in paperless storage and transmission, regardless of whether a signature is required, agrees Kelly Purcell, EVP at eSignSystems, an e-signature software provider. "Insurers that are not ready to do e-signatures know they can do e-delivery and, because they are delivering electronically, they will have audit trails."
Maya Assurance offers special commercial-lines livery insurance and is bound to New York State's regulatory compliance requirements. Audit trails, records retention policies and privacy are critical to the growing insurer. KJ Singh, Maya's VP, says his decision to go 99-percent paperless is in part a result of learning from others.
"We were aware of another company that stored its paper documents in its office's basement and found that termites had destroyed entire boxes of policies, endorsements, claims files and more," he says. "With no document images and no hard copies, we knew what that meant for that company," he said. The solution was not to simply house paper elsewhere.
With the help of Cabinet, an electronic document and workflow management software provider, Maya put in place document management policies and an efficient records retention system that provides privacy and security. Maya scans 200 pieces of incoming mail daily, then ships the documents to a storage facility. Maya's operations, underwriting, accounting, claims and finance departments all work exclusively with digital documents.
Singh says they researched other industries, such as banking, and other processes, such as Check21, which enables the recipient of the original paper check to create a digital version of the original check. This eliminates any further need for the physical document. So rather than the 40 agents only having the capability of transmitting e-signed documents, they get the signatures on-site, scan and e-mail them for archiving.
"Regardless of whether agents mail us a paper copy of the original or take the original document and convert to digital, that document becomes a non-editable original document. From those scans, we can reproduce a legal document that's sufficient in a New York court of law," Singh says.
Grinnell Mutual Reinsurance also sees the value of automating workflows, so much so it incorporated that initiative into its records retention program, notes Martina Hull, director of content management and business intelligence at the 100-year-old company. Responsible for enforcing records-retention rules, Hull's team considered both business and legal needs as her department automated almost every department over the past four years. The billing department is scheduled for 2013.
"It's not just the documents we are focusing on, but also the data," Hull says. "We must be in compliance with state and federal laws, and we must create a secure environment to reduce risk."
Grinnell users can work remotely and view business documents through a secure site, removing the risk of taking documents home and possibly having something happen to them.
Hull says that Hyland Software's Onbase enterprise content management software facilitates the flow and placement of electronic documents. "We scan everything, and 75 percent of the communications we get from external sources are electronic, too. We suck them into Onbase, so our users don't know the difference."
Grinnell's mutual companies and agents can access electronic policy notes that fit inside the Onbase "workview" area. For policy processing, customers can go to Grinnell's Web front end and sign documents, Hull says. And although they are not managed in Onbase, the documents end up there. To further reduce risk, Grinnell's FTP site holds access to medical records, Social Security numbers and other sensitive data.
"I used to get funny looks talking about the notion of electronic compliance reducing risk," says Lockelord's Hatfield. "Not anymore."
There is still plenty of confusion about what certain terms mean from a compliance standpoint. in guidelines issued to ACORD on insurance e-signature and e-delivery, Greg Casamento and Patrick Hatfield, partners at Locke Lord Bissell & Liddell LLP, explained some of the more common terms:
Digital Signature - A method of encrypting an electronic record using a hash value with a private key and may or may not be an electronic signature, which is a signature in electronic form having legal significance.
Electronic Record - A contract or other record created, generated, communicated, received, or stored by electronic means.
Electronic Signature - An electronic symbol or process having legal significance and attached to, or logically associated with, a contract or other record that is executed or adopted by a person with the intent to sign the record. it does not necessarily need to be a process qualifying as a digital signature. A process where a person speaks his or her consent in a way that is associated with terms and conditions in a record with an intent to be bound to those terms can be an electronic signature.
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