SELLING INSURANCE ON THE INTERNET PART IV
USING the generally accepted estimate that there are over 25 million internet users world wide, European surveys show that a full 10 percent report using the internet to shop for goods and services in place of going to their favourite local shopping mall.
Attempting to capitalise on this increase in the internet's usage, both the travel and financial services industries now use the World Wide Web to transact business as well.
With respect to insurance, current online sites consist mostly of static insurer sites, insurance producers, quote providers, a few ancillary services, insurance regulators and trade associations.
Insurer sites currently provide varying levels of information about their insurance products, premium levels and insurer contact information for consumers interested in buying coverage.
Some insurer sites link potential customers to a nearby agent; others ask the consumer to contact the insurer directly.
Several insurance agents are advertising their services on line, particularly insurance brokers, to assist consumers with locating the desired coverage.
Some agent sites even have online forms for clients to submit basic information, assisting the agent or broker to provide the requested or alternatively ap- propriate products and services to consumers. If insurance coverage is needed, the consumer is contacted and underwriting usually proceeds via normal traditional channels.
Other sites of interest to consumers are those posted by quote providers. These sites allow consumers to compare the premiums of several insurers.
Typically free to the consumer, quote providers also attempt to link potential customers with insurance carriers, usually by providing a hyperlink, telephone number, or email address.
For those who really want the nuts and bolts of premium calculations, there are also sites that provide insurer rates, for a fee, in a downloadable format.
The rates only apply to countries with prior approval requirements and, as one might expect, are usually difficult to understand. These types of rating services are typically visited only by insurance professionals, though they are available to anyone and the fees are reasonable.
Some countries have developed personnel policies that define acceptable uses of the internet as a tool to assist with work performance, just like policies developed in years past defining how to appropriately use a computer or telephone to complete work assignments.
Internet access is provided by the employer for the purpose of completing a job; any personal use is incidental and must not interfere with work performance; and management has the right to monitor and restrict usage, should the employee fail to adhere to the agency's policy.
Agencies may require all new employees to sign a copy of the internet usage policy for placement in a personnel file, indicating that the employee was indeed furnished with, and read the policy.
Some agencies are also incorporating internet, electronic mail and voice mail policies into one overall communications policy.
To be used effectively, internet access must be seen as a communication tool, just like a telephone, computer or typewriter. Very few people would seriously consider operating a business without a telephone. Today, that notion is more commonly being extended to internet access as well.
Once a regulatory agency has access to the internet, additional tools may be necessary for effective company/agent communications. The internet also is a tool which could enhance company and agent communication. With the use of the internet, agents can have a continuous line of communication to their insurance companies.
This could enhance the educational level of agents and thus enhance the information agents pass on to consumers during the sales process. In addition, the internet has the potential to permit the electronic transmission of policy forms; thus cutting down on the cost of the application and policy issuance process.
Elements of insurance transactions in the insurance contract contain the promise by the insurer to perform at a future date; coupled with the policyholder's promise to pay premiums is a fundamental principle of insurance business.
To better understand this principle, it is essential to understand the elements of a contract. We need to examine the elements of an insurance transaction.
Insurance policies generally contain the above elements. However, the process of achieving a fully executed insurance policy may vary based on a number of factors, including among others things, the type of insurance, e.g., personal lines property and casualty vs. life vs. health vs. commercial/business, etc; the type of policyholder, e.g., group, individual, corporate; and, as we are seeing, the method for memorializing the agreement, written vs. electronic signature and/ or other methods.
Even though differences may exist among the various types of insurance, the following steps typically represent the general means for achieving a binding insurance policy; Offer; the act of a person applying for coverage.
Acceptance; an insurance carrier applying its underwriting standards and issuing the policy is commonly considered the act of acceptance. In those instances where a risk is not acceptable to the underwriter, but coverage could be provided at a higher premium, the issuance of a policy at the higher rates or for different coverage would be considered a counter offer which could be rejected or accepted by the consumer.
Consideration; in an insurance policy, consideration is obtained by the policyholder paying premiums in exchange for the insurer agreeing to pay benefits at some future date, if certain conditions are met.
Legal purpose; pursuant to the regulatory power of the respective state, insurers cannot enter into insurance contracts for products or services which are unlawful.
For example, business interruption coverage for a drug dealer would be illegal. Legal competency of the parties; the above basic rules as to legal competency generally apply in the context of the insurance contract.
From the consumer's standpoint, the primary issue is not whether all of the elements of a contract exist. Rather, the consumer primarily seeks to know one thing at the time of sale: is my coverage effective?
Typically, with an insurance policy, there are several methods for validating the binding effect of coverage following completion of the application process by a consumer e.g., a conditional receipt may be given or the insurance policy or contract may be issued immediately.
However, to achieve this validation of coverage, the consumer typically signs an application form indicating an offer to purchase insurance and a general understanding of the terms of coverage.
Today, electronic commerce i.e., computer generated, online applications poses a number of problems for insurers and consumers seeking to ensure the validity of the binding effect of the insurance transaction.
Among other things, an acceptable method for verifying the identity of the applicant and recording the applicant's intention to purchase the insurance product must be found.
Electronic signature technology currently does exist to address these problems and many western countries are passing electronic signature laws to address control them.
However, the question still remains whether electronic signatures affixed to an electronic application and/or policy will be legally sufficient to form an enforceable insurance contract in the remaining states.
Very few court decisions exist on the use of electronic signatures. However, as discussed below, a number of western countries have moved forward to either enact or propose legislation on electronic signatures. Additionally, general principles of contract law offer some latitude on the use of non traditional signatures.
The traditional form of signature is of course the name of the signer, hand written in ink. But initials, thumbprint or an arbitrary code sign may also be used; and the signature may be written in pencil, typed, printed, made with a rubber stamp, or impressed into the paper. Signed copies may be made with carbon paper or by photographic process.
Look out for part V.