The Office of General Counsel has issued the following informal opinion on February 9, 2000.
Use of Internet for Sales and Marketing
1. May an insurer place blank application forms for life insurance products on its web site in a password protected area to make them available on the Internet to producers who can access and print them on their own printers for completion and submission by non-Internet means?
2. May an insurer create a password protected section on its web site for a "Model Illustration" that enables producers to input information thereon about a prospective member which information is then used to make the calculations and produce the final illustration which is specific as to the particular prospective member, as regulated by N.Y. Ins. Law §3209 (Mc Kinney Supp. 1999-2000) and Department Regulation No.74 (N.Y. Comp. R. & Regs. tit.11 §§ 53-1.1 - 53-3.7 (1999))?
1. Yes, an insurer may place blank life insurance product application forms on its web site in a password protected area to make them available on the Internet to producers who can access and print them on their own printers for completion and submission by non-electronic means.
2. Yes, as long as the "Model Illustration" is placed on the web site by an insurer in a format which complies with the formatting requirements under the New York Insurance Law in such a way which ensures that the final illustration that the producer would print off of the web site conforms to those requirements contained in Department Regulation No.74 (N.Y. Comp. R. & Regs. tit.11 §§ 53-1.1 - 53-3.7 (1999)).
An insurer would like to use the Internet to conduct some of its insurance business in the following ways. One its proposals is to facilitate the distribution of blank life insurance application forms to producers, which the insurer describes as follows:
We have application forms for whole life and term products. We would like to put the blank forms in a separate area of our website. The area would be password protected. The agents and voluntary producers then could print the applications in blank on their own printer for their own use. This would save us a great deal of time and expense in printing and distributing to each new agent or voluntary producer a package containing all the necessary application forms. The applications would not be filled out on the internet. The applications would not be filed with us via the internet. The internet would only be a source of blank forms for use by our agents and voluntary producers.
The download or printing by the agent would be in the same type face as the original application. There will be some changes none of which are substantive. The differences will be:
1. Our applications are on different color paper. The agent will be printing the applications on white paper.
2. Some of our applications are on the front and back of 8 1/2 X 11 sheet which will change where the questions are located but not the order. It is suggested that we add page numbers in the format of "Page -- of--" to insure that there are no mistakes in pagination.
In using such a system, all producers would be required to use black ink and would not have any authority or ability to change the text, layout, pagination, type size or formatting of the applications.
The insurer also proposes to use the Internet to give its producers access to what it refers to as its "Model Illustrations," citing to N.Y. Ins. Law § 3209 (McKinney Supp. 1999-2000). The insurer has summarized the proposal as follows: "The agent or voluntary producer will only have the ability to input the information about the prospective member. The program would receive the information, calculate the guaranteed and non-guaranteed elements and produce the final illustration product. This section of our website would be password protected. The agent or voluntary producer would have no authority or control over changing any of the text or numerical pages of the illustration. At the same time we could maintain a database of prospects who receive the model illustration and the terms that were illustrated."
New York State has enacted into law the Electronic Signatures and Records Act ("ESRA"), as part of Chapter 4 of the Laws of 1999 that added the State Technology Law as new Chapter 57-A of the Consolidated Laws. ESRA establishes a legal framework in New York for the conduct of electronic commerce. ESRA grants the Office for Technology ("OFT") broad authority as the Electronic Facilitator to promulgate regulations to effectuate the law and to issue guidelines. The provisions of the State Technology Law become effective on March 26, 2000. ESRA does not address issues regarding the formatting of documents in connection with insurance business. The Department has issued Circular Letter No. 33 (1999) regarding the use of electronic commerce in the insurance business.
Statutory and regulatory formatting requirements that apply to a non-electronic document also apply to the electronic version of the document. The transmission of insurance documents over the Internet should be done in such a way that the electronic document version placed on the web site complies with the formatting requirements and the document that is printed off of the web site will be in compliance with the formatting requirements.
Life Insurance Applications -
There are no statutory formatting requirements in the N.Y. Insurance Law applicable to life insurance applications themselves. However, Department Regulation No. 74 (N.Y. Comp. R. & Regs. tit.11 §§ 53-1.1 - 53-3.7 (1999)) (the "Regulation") contains several formatting requirements, one of which applies to applications. Regarding graded death benefit life insurance issued to persons between the ages 50 and 75, Subpart 53-2.3 of the Regulation contains the requirement that the prospective purchaser of such life insurance be provided with a "prominent notice," on the application, with the application or included as part of a sales illustration summary (if the summary is used by the insurer as the preliminary information). The notice must appear in the form set out in the Regulation, or in a form containing substantially similar information approved by the Superintendent.
Other than the foregoing, there is no other statutory or regulatory restrictions as to how life insurance application forms are to appear. Therefore, the fact that the application form as printed from the web site will not be identical to the paper application forms currently used, in that they may not be two-sided and will be printed on different color paper, does not render the use of printed copies of the electronic versions of the application forms improper under the Insurance Law.
Model Illustration -
The producer would input information specific to the prospective member to the model illustration form on the web site and the program therein would then transform that information through various calculations and place the resulting information into the final illustration which is then printed out for that particular prospective member.
Section 3209 of the N.Y. Ins. Law (McKinney Supp. (1999-2000)) contains various disclosure requirements for, among other things, life insurance. One such disclosure document is the illustration, the format of which is to be prescribed by the Superintendent by regulation. Subsection (k) specifies, in pertinent part, as follows:
(k) The superintendent shall also promulgate by regulation standards governing the content, format and use of illustrations of individual life insurance policies and certain group life insurance policies and certificates, The superintendent in developing regulations to govern the content and format of the preliminary information, policy summary and illustrations shall ensure that such forms are presented in an easy, concise and meaningful way to enable consumers to understand the operation of the policy or contract.
Subpart 53-3 of the Regulation applies to any illustration presented in New York State for the purpose of proposing to make a sale of a life insurance policy or an annuity contract. Illustrations are not required to be filed with the Department and are not subject to its approval. However, Subpart 53-3.3 of the Regulation regarding basic illustrations contains various standards, including, but not limited to, the following formatting standards which are applicable to the illustration. A basic illustration must be labeled with the date of preparation; each page must be numbered and show its relationship to the total number of pages; specified statements must be signed by the applicant and producer verifying that the required illustration was given and must be included on the same page as the numeric summary. If an illustration is created as an electronic document, the insurer must comply with all of the Regulation's requirements for such forms, including the formatting requirements.
The formatting requirements can be met by an insurer who places a compliant electronic document version of the illustration on its web site as long as it takes steps to ensure that those viewing it and printing it off of the web site receive the illustration in the required formats.
For further information regarding this opinion, you may contact its author, Associate Attorney Barbara A. Kluger of the Departments New York Office.