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Insurers increasingly are reaping the benefits of electronic signatures, but lagging back-end technology and compliance concerns are slowing adoption by many.

Although all insurers look to improve efficiency through straight-through processing, empower agents with the latest technologies and enhance customer service, many have yet to implement a seemingly obvious efficiency: e-signatures. "The e-signature capability is growing, but it is not growing as fast as many people thought it would," says Craig Weber, a senior analyst with Celent's (Boston) insurance practice.

There are three popular methods of e-signature used in the insurance industry, according to Weber: biometric, which measures shape, stroke speed and pressure for authentication purposes; voice pattern verification; and clickwrap, a Web-based "I Accept" button that confirms an agreement. Though e-signatures have been legally acceptable since 1999, carriers' misconceptions about the legality and risk of using them, the lagging enhancement of legacy systems for paperless processing and confusion over the competing e-signature technologies are preventing many insurers from adopting the technology, Weber notes. "Compliance is one of the main reasons carriers are wary about getting into this," he asserts. "The concern is that state insurance departments will not look favorably on the changes, and it does require a significant effort to demonstrate that the process is secure." But the benefits can be enormous, Weber adds.

The Next Step in Automation

The benefits are clear to Baltimore-based Monumental Life Insurance ($20.2 billion in total assets). According to Sandy Campbell, second vice president of field technology and administration for Monumental Life, the life, health and cancer insurance provider began considering e-signatures in 1996 when it rolled out an electronic application on its captive agents' laptops.

"At the time, it took at least four or five days for the forms to get to the home office through the mail," relates Campbell. And since all the forms had to be scanned manually into the insurer's Automated Work Distributor (AWD) system from DST Technologies (Kansas City, Mo.) before policies could be underwritten, processing even basic applications took a minimum of seven to 10 days, she adds. "We were automating a lot of things, and electronic signatures were just the next step in the process," says Campbell.

Because the technology was still maturing, Monumental Life's IT organization didn't seriously begin exploring how to incorporate e-signatures into the carrier's business process until 2000. Monumental Life designed the e-signature software in-house using HTML and XML code to integrate with its proprietary application library. "In order to have our agents accept the e-signatures program, we needed to find a small signature pad our agents could easily carry and attach to their laptops," explains Campbell.

Campbell says she and the carrier's IT team tested signature hardware from several vendors to make sure it could endure the rugged environment in which agents work. "If it takes us a half hour to break the gel-based pads, it will take our agents five minutes," she quips. In 2001, Monumental Life selected Topaz Systems' (Simi Valley, Calif.) SignatureGem digital signature capture solution.

Because the insurer's legal team was not satisfied with getting just one signature and applying it to all forms, Monumental Life decided to require a second signature to verify the list of forms to which an e-signature would be applied, Campbell notes. "The Maryland Insurance Commissioner was impressed with the signature process and the protection it offers our customers," she says.

Monumental Life rolled out electronic signatures in 2002 to 2,500 agents across 27 states. So far, Campbell says, the automated process has saved her company millions of dollars. The carrier also has cut the policy cycle time down to two days for many applications, she notes. "Forty-three percent of our applications are processed and approved electronically," says Campbell, adding, "We have seen a significant improvement in processing times."

Of course, creating a paperless environment that incorporates e-signatures requires a considerable investment. Building the infrastructure to support a paperless workflow and deploying the technology to enable e-signatures took National Planning Holdings (Santa Monica, Calif.) -- an affiliate of Lansing, Mich.-based Jackson National Life Insurance ($68 billion in total assets) that consists of four broker-dealers: INVEST Financial Corp. (Tampa, Fla.), Investment Centers of America (Bismark, N.D.), National Planning Corp. (Santa Monica, Calif.) and SII Investments (Appleton, Wis.) -- five years.

Between 1998 and 2003, Jackson National Life's IT department, which is shared by the broker-dealers, redesigned its systems to a Java-based shop using IBM (Armonk, N.Y.) Unix servers. The company created an in-house paperless workflow engine integrated with FileNet's (Costa Mesa, Calif.) Document Imaging System to process applications seamlessly. "We had to work out our own internal systems to create a real-time paperless workflow," says Robert Dearman, assistant vice president, broker-dealers and RIA systems, Jackson National Life.

The company then identified a process that uses a biometric electronic signature and a clickwrap as the best solution for its agents and customers. The process, which relies on Interlink Electronics' (Camarillo, Calif.) IntegriSign Signature Software Suite and ePad, requires a client to provide an electronic signature and click on a Web-based button to authorize the use of the e-signature. "Encrypted IDs and passwords for customers seemed very complicated," says Dearman. "If someone ever disputed their signature, we wanted to be in the most secure position possible."

Once an applicant provides an e-signature, it is encrypted by the Interlink device and transmitted through a secure Web portal to National Planning Holdings' back office, where it is given a unique transaction identity. "The signature is bound and encrypted with a hash number specific to the transaction," explains Dearman. The signature then is stored in the insurer's in-house electronic order entry system so the transaction can be replayed for legal purposes.

After completing due-diligence testing against all 50 states' regulations to make sure the process was compliant, Jackson National Life began rolling out the capability to its representatives in November 2005. The rollout is scheduled for completion by the end of 2006. "Our goal is to make the sales process seamless for our representatives," says Lynn Niedermeier, CEO of INVEST Financial Corp.

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