An Electronic Signature is a Written Signature
According to Catherine Smola, President and CEO of the Centre for Study of Insurance Operations (CSIO), 5% of Canadian brokers use an electronic signature.1 Although the use of electronic signatures is not yet particularly widespread in the insurance industry, it is growing by 48% every year.2 It is important to recognize that clients—with their ever growing appetite for flexibility—will soon start demanding e-signatures, which are already used frequently in other industries. This article provides an overview of the legal and ethical obligations related to the use of electronic signatures.
Cost reduction, increased efficiency, concern for the environment, optimizing processes—there are many reasons that prompt insurers and firms to move towards a paper-free environment.
In Quebec, the use of electronic signatures and the distribution of electronic documents are not clearly defined in the Insurance Act and the Act respecting the distribution of financial products and services (ARDFPS), although the Autorité des marchés financiers did carry out its first consultation with the industry on this issue in 2012. “Legislation governing the industry in Quebec was drafted before the advent of the digital age,” says Mr. Jean-Philippe Mikus, a partner with Fasken Martineau and one of the experts consulted during the drafting of CSIO’s Advisory Report: Electronic Signature and Delivery. “However, the terminology used in the old legislation, including the concept of a contract, the written word, a signature and a document, may now be interpreted in the broadest sense, thanks to the Act to establish a legal framework for information technology (AELFIT).”
A signature in writing is required.
A person’s signature may be affixed to a document by means of any process that meets the requirements of the AELFIT, including an information-technology based process.3
An electronic signature is therefore accepted and valid as long as it respects the legal framework. “To avoid any challenges, a sufficiently reliable link must be established between the electronic signature, the person and the document,” explains Mr. Mikus. “In other words, one must be able to prove the integrity of the document, that is to say, the identity of the signer, the fact that he affixed his signature to the document in question and the fact that the document cannot be altered after signing.”
What is an electronic signature?
Several types of electronic signatures may be used: “A signature can be valid simply by putting one’s name at the end of an e-mail. However, this practice is not very reliable since it is easy to pass off an e-mail as coming from someone else.”4
Simply clicking on the “I Agree” button is equivalent to an electronic signature, as long as the signer can be identified. A secure identification process, such as a personal identification number (PIN) or a password, must thus also be included.
A digitized signature—in other words, signing the document with an image of the signature—is not recommended, since it can be easily copied.
Finally, there is the digital signature—the solution that most closely complies with the requirements of the law. The digital signature uses a public key infrastructure (PKI) that ensures the document’s integrity and its confidential transfer in the virtual world, and guarantees that it has indeed been signed by the designated person. Insurers or firms that wish to use a PKI must hire a professional to install the required software.
“Regardless of the solution under consideration, the insurer or the firm must ensure that the client has access to the full document before signing it and that the process includes the signer’s clear confirmation of his signature,” explains Mr. Mikus. “The insurer or the firm must also properly explain to the client how to sign the document and record the date, the time and the signature on the document. Of course, the document’s integrity after signing must not be compromised.”
When these conditions are met, the electronic signature is the equivalent of a handwritten signature. Until now, a lack of understanding of the legislation and regulations governing the use of electronic signatures and the transmission of electronic documents has been such that the damage insurance industry has continued to use the traditional approach, despite clients’ mounting expectations to the contrary. However, the situation is likely to change once the ARDFPS begins to address the realities of today’s world.
Electronic, digital, digitized… a few definitions5
Electronic signature: electronic information that a person creates or adopts in order to sign a document that is in, attached to or associated with the document. For example, confirming by e-mail or clicking on the “I Agree” button.
Digital signature: a mathematical scheme (using public key and private key encryption) for demonstrating the authenticity of a digital message or document. A digital signature is a specific means of implementing an electronic signature, although not all electronic signatures are digital signatures. It is not a signature so much as it is a code.
Digitized signature: an image of a handwritten signature taken from an electronic signature pad or paper scan. A digitized signature is not a digital signature, and is generally not seen as secure because it can be easily copied.
Can you renew an insurance contract by e-mail?
A company may enter into a contract by e-mail if it has the technology to ensure that the document remains safe and tamper-proof. Furthermore, a document in electronic form can satisfy the requirement that it be “in writing” as long as the recipient can store the information in electronic form and access it for subsequent reference.6
Pursuant to the AELFIT, a contract may be entered into, whatever the medium used—e-mail, fax, telephone, on-line form. However, the offer must be clear and unambiguous, and the representative must be able to confirm that his client has indeed received the contract.
The representative may ask the client to acknowledge receipt of the contract by e-mail or by other means, for instance by telephone. Confirming by telephone avoids e-mails being lost or filtered out as spam and sent directly to the spam folder. However, no matter what renewal method is used, the agent or broker must take the necessary steps to ensure that the coverage provided corresponds to the client’s needs.7
- CHAMPIGNY, Sandrine. “La signature électronique appelée à gagner en popularité auprès des cabinets de courtage,” Journal de l’assurance, August 2014, p. 33.
- HORNE, Donald. “Are legal concerns holding back e-signatures?,” Insurance Business, February 23, 2014.
- Section 38 of the Act to establish a legal framework for information technology and section 2827 of the Civil Code of Quebec.
- GAUTRAIS, Vincent. Afin d’y voir clair. Guide relatif à la gestion des documents technologiques, Fondation du Barreau du Québec, p. 20.
- CSIO and Fasken Martineau. Advisory Report: Electronic Signature and Delivery, November 2013, p. 14.
- Ibid., p. 5.
- Section 39 of the ARDFPS.