By FRANK SENTNER, who for the last 11 years has been the director of strategic technology for the Council of Insurance Agents & Brokers
Comfort with business e-mail and the combination of a slowing economy and rising courier costs are enhancing the attractiveness of paperless business transactions. However, recent e-commerce court decisions combined with e-discovery horror stories give pause to those insurance professionals who are currently using their standard e-mail programs for business-critical correspondence.
In May 2007, for example, the landmark U.S. federal court case Lorraine v. Markel highlighted some of the biggest shortcomings of e-mail. In this case, all of the printed e-mail evidence was discarded by the judge because neither party could authenticate the e-mail content or the transmission of electronic record data of the disputed e-mail message.
In the end, the costs involved to the litigants weren't significant but the case highlights what is occurring quietly, often in far greater magnitude, behind the scenes in confidential binding arbitration.
"The industry can no longer ignore the opportunities brought on by electronic transactions--and we can no longer ignore the real costs of transitioning to electronic without proper systems in place to protect against disputes," says John Muir, senior partner at Willis Ltd. and chairman of the London Market Endorsement Steering Group, which is promoting the wider adoption of electronic submission and agreement of contract changes. "There is real cost if we don't take action. There is a greater cost if we take action without putting the proper accountability measures in place."
Standard e-mail lacks verifiable proof of delivery, content of e-mails and attachments, uniform time sent and received and transaction audit trails. With a few mouse clicks, anyone can easily alter an incoming e-mail or an e-mail in their sent folder and purport it to be the original message.
A recipient could also easily delete an e-mail and claim it was never received or dispute the time of delivery for time-sensitive communications. An archived version of standard e-mail may prove what you sent, but it does not prove what was received by the counter party. And the "Read Receipts" that you get from your standard e-mail program are legally meaningless and provide no evidentiary value since they can be easily forged, do not prove content and require recipient action and settings to function.
In sum, printed copies of e-mail, traditional e-mail read receipts and e-mail archives are inadequate in defending against legal challenges involving delivery, time, or content of business e-mail and are easily dismissed once questioned. By way of example, if an insurer claims they never received an endorsement from an agent that was sent via e-mail, how would the agent ever produce legally valid proof of the message delivery status and content?
Registered e-mail services address the shortcomings inherent in simple e-mail thereby providing sufficient protection and comfort for businesses to move to electronic transactions. Registered e-mail messages provide legal and verifiable proof of delivery, message content including attachments, and official time stamp, all embedded within a digital snapshot of the server-to-server transaction attached to a "registered receipt" e-mail that is automatically returned to the sender.
Doug Mills, vice president and chief operating officer of New Orleans-based insurance broker Gillis, Ellis & Baker Inc., says his company became interested in using such a service in connection with the renewal of an errors and omission policy.
"The proper use of e-mail was one of the focal points of the audit," he says. "Through the audit, we learned that courts would not always admit traditional e-mail as evidence. We realized we needed to be able to have legally verifiable proof that our e-mails were sent, received and had not been altered."
Gillis, Ellis & Baker uses a service by a company called RPostŪ.
Since Hurricane Katrina, the insurance industry has become sensitive to agent-client and agent-carrier/broker communications, as the industry's dealing more with nonstandard policy forms and a changing set of terms and conditions, Mills also says.
Aon, the Chicago-based global brokering giant, has also recently begun using RPost's mail services for 1,500 employees in the broker's U.K. division. The service protects Aon against misunderstandings regarding e-mail, particularly involving reinsurance transactions among major trading partners.
"Aon continues to lead the market's transition from unstructured data or paper to structured data in support of the insurance/reinsurance life cycle, however, as with many businesses, e-mail is increasingly used during negotiation processes and as such, there is the potential for its abuse," says Ian Summers, managing director--eBusiness & Market Reform, for Aon Ltd.
Brokers are not the only members of the industry who are benefiting from the service. Underwriters are adopting the service too as a way to deliver regulatory notices, waiver and rider documents electronically while retaining legally verifiable proof of delivery.
Registered e-mail messages give large and small insurance companies an effective, yet simple means to drive business success through electronic process improvement while retaining full legal protections, according to proponents of registered e-mail services.
In addition to RPost's core service for proof, RPost offers proprietary electronic signature features which are allowing claims processors to get client signoff on waivers, coverage decisions, payouts and settlements by e-mail without the need for paper. On average, the service is cutting down on signoff turnaround time from four days to one day.
More than 100 new insurance industry customers have signed up for RPost's service in 2008 so far, according to RPost executives.
Registered e-mail services can replace certified mail channels and standard e-mail in need of protection and proof of delivery.Deliveries of pieces of certified and overnight envelopes by the three U.S. majors, the United States Postal Service, FedEx and United Parcel Service, came to more than 1.1 billion pieces in 2007, according to their annual reports.
RPost executives estimate that at least 50 percent of all physical certified mail volume has an electronic origin, and is therefore a candidate for a registered e-mail service. Given that assumption, the size of the global market for registered e-mail could be worth more than $400 million at the average price of $0.59 per registered e-mail unit, according to RPost. Adding mail volume from first class mail, faxes, telephone calls and regular e-mail could push the size of the market for registered e-mail to nearly $1 billion, according to RPost.
Although often not publicized, disputes regarding e-mail do happen and pose a real and expensive threat to corporate e-mail users.
A June 2008 poll of major insurance brokers revealed that 40 percent of respondents had already been involved in at least one dispute where the delivery or content of an e-mail was an issue, according to an RPost poll. Companies who've been through e-discovery know that electronic file search, legal fees and errors and omissions liability is expensive, underscoring the need for a registered e-mail service.
The Graham Company, a commercial insurance brokerage based in Philadelphia, is a case in point. The firm has a 32-person claims services department, and many Graham Co. clients take advantage of this service to report claims through them rather than directly to the carrier.
In one instance, a claims consultant sent a general liability report for a $60,000 claim to a carrier using a registered e-mail service. Months later, the carrier stated that they were denying coverage because the insured did not report the incident to them in a timely manner. "If we had been unable to prove delivery of the claims report, the insurer would certainly have declined coverage for the claim because of late notice," says Peter Prinsen, general counsel for the brokerage.
Fortunately, this was not the case. Because the claims consultant had used RPost's service to send the claim first report, he was able to retrieve the registered receipt e-mail and prove to the insurance carrier that the message and attachment had been delivered to the carrier's system on time. The carrier ended up covering the client.
"As e-mail has become one of our primary forms of communication, I became concerned about our ability to prove that a recipient of an important e-mail actually received it," says Prinsen. "That led us to look for a method by which we could prove that delivery of an e-mail actually occurred." Graham Co. also uses RPost's Registered E-mailŪ offering.
Many companies, from individually-owned businesses to big insurance carriers, are using a registered e-mail service. It's helping them close business faster and cut the cost of certified mail by more than 60 percent by cutting time spent on trips to the post office, eliminating faxes, minimizing time spent filling out forms and reducing errors and omissions exposure, according to RPost CEO Zafar Khan.
A major convenience for insurance professionals is the simplicity of the service, which does not require the e-mail recipient to sign up or maintain additional user names and passwords, says Khan. In short, the service is recipient- agnostic, requiring nothing new on the part of the recipient who simply opens, reads and responds to the Registered E-mailŪ message just like standard e-mail. For the sender, using the service requires one click of a 'Send Registered' button on the regular e-mail compose page.
While the business of insurance has relied on handshakes and personal relationships for years, the industry can no longer ignore the efficiencies afforded by electronic insurance transactions. With electronic transactions comes post-placement administrative correspondence that is part of the business record and conducted predominantly by e-mail. As such, exposure to new risks of disputes around who says what to whom in an e-mail can strain business relationships and errors and omissions liability cash reserves.
November 1, 2008
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