The Office of General Counsel issued the following informal opinion on September 25, 2000, representing the position of the New York State Insurance Department.
Re: Payment of Insurance Premium by Credit Card on Internet or Telephone
1. May a life or accident and health insurance policy or annuity contract be bound by an insurer on the basis of an initial premium payment made electronically by the applicant using a credit card over the Internet and without having the applicants signature on any of the accompanying documents, including, but not limited to, credit card forms, applications, replacement forms, sales illustrations and conditional receipts?
2. May an insurer bind insurance coverage as soon as an insured pays for guaranteed issued insurance over the telephone by credit card, if later the insurer sends the requisite application to the insured who executes it?
1. It depends upon whether or not signatures are required under the New York Insurance Law or regulations thereunder, in regard to each kind of policy or contract purchased. If an insureds signature is required, then the policy or contract may not be bound solely by the making of a credit card payment over the Internet, unless an electronic signature is obtained in accordance with such statute or regulation. If no signature is required, then the policy or contract may be bound when the insured makes an electronic payment of the premium using a credit card on the Internet.
2. It depends upon whether or not signatures are required under the New York Insurance Law or regulations thereunder, in regard to each kind of policy or contract purchased. If a signature is required, then a credit card charge over the telephone would not be a sufficient basis upon which the insurer could bind the insurance coverage immediately. If no signature is necessary, then the policy may be bound.
An insurer inquires as to whether the purchasing of a life, accident and health insurance, and annuity contracts, using a credit card over the Internet or over the telephone, would bind the policy without the execution of any related or requisite forms.
The use of credit cards for the payment of premiums for insurance policies is permitted under the New York Insurance Law. (See General Counsels Opinions: May 9, 2000, April 6, 1995, and December 27, 1991, for guidelines governing the use of credit cards generally.) Therefore, whether an insurance policy or contract may be bound based solely by the use of a credit card for payment by the applicant depends upon compliance with other relevant statutory and regulatory requirements (whether over the telephone or via the Internet.)
New York State enacted the Electronic Signatures and Records Act ("ESRA") as part of Chapter 4 of the Laws of 1999, adding the State Technology Law as new Chapter 57-A of the Consolidated Laws, N.Y. State Tech. Law §§ 101-109 (McKinney Pamphlet 2000). ESRA establishes a legal framework in New York for the conduct of electronic commerce. I note that the recently enacted federal "Electronic Signatures in Global and National Commerce Act," 15 U.S.C. § § 7001-7031 (2000), may preempt, in whole or in part, ESRA. The New York Office for Technology ("OFT), which is the electronic facilitator under ESRA, is currently examining the issue of preemption and we therefore offer no opinion at this time as to whether or not a particular technology or procedure constitutes an electronic signature, and whether or not it complies with the laws.
Generally speaking, insurance transactions may be effectuated electronically over the Internet to the same extent that they may be effectuated by other means. That is, effectuating an insurance transaction over the Internet does not add any additional requirements not otherwise required under the Insurance Law. However, requirements may not be disregarded, such as formatting and signature requirements, because the transaction is being effectuated over the Internet. Thus, if a statute or regulation required a signature to effectuate a certain type of policy, then a signature must be obtained.
Similarly, if a signature is required by the New York Insurance Law or regulations thereunder, then a credit card charge over the telephone would appear to be insufficient to bind the insurance immediately unless, in doing so, an electronic signature is obtained that meets the criteria under the law. We offer no opinion as to what constitutes an electronic signature over the telephone at this time.
For further information, you may contact Attorney Meredith S. Kaufer at the New York City Office.