New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on September 23, 2002, representing the position of the New York State Insurance Department.

Re: Records Retention by Insurance Brokers – the Use of Document Imaging Technology for Storage Purposes

Question Presented:

Is there a New York State regulation governing an insurance broker’s use of document imaging technology to store insurance records?

Conclusion:

Although there is no insurance regulation which specifically addresses an insurance broker’s use of document imaging technology, there is nothing in the N.Y. Insurance Law or regulations which prohibits an insurance broker from maintaining insurance records using document imaging technology so long as the general record retention and security provisions addressed in the Insurance Law and regulations described in the analysis below are satisfied.

Facts:

ABC Corp. is a systems integrator specializing in document imaging that has clients who are insurance brokers considering document imaging. The inquirer would like to know if there are any New York regulations regarding the use of document imaging technology by insurance brokers that specifically addresses document imaging requirements, retention times, security and optical storage requirements. The inquirer did not describe the nature of the particular document imaging technology to be utilized and his question was very general.

Analysis:

New York State enacted into law in 1999 the Electronic Signatures and Records Act ("ESRA) which is contained in Article I of the State Technology Law (McKinney 2002 Pamphlet). ESRA creates a statutory structure that enables the use of electronic signatures and electronic records in everyday public and business undertakings. Subsequent to the adoption of ESRA, the federal Electronic Signatures in Global and National Commerce Act (15 U.S.C. §§ 7001-7006 ("E-Sign Act") was adopted to permit and encourage the expansion of electronic commerce in interstate and foreign commercial transactions. It is not identical to ESRA but has the same purposes. ESRA has recently been amended by Chapter 314 of the Laws of 2002, effective August 6, 2002, to ensure that the two laws, state and federal, continue to complement each other in achieving their stated purposes, working in tandem to promote the use of electronic technology. The Department supports the integration of electronic commerce into the operations of the insurance industry in the State.

There is nothing either in the New York Insurance Law nor the regulations promulgated thereunder which prohibits an insurance broker from maintaining insurance records in an electronic medium through the application of a technology such as document imaging. There are certain provisions of the Insurance Law, such as § 2119(a),(b) and (c) (McKinney 2000) that require certain records to be in writing and that copies be maintained for specified periods of time. However, it is the position of the Department that such statutes that utilize the word "writing" permit electronic documents. See, Circular Letter No. 33 (1999) that can be viewed on the Department’s Web site at www.ins.state.ny.us. The required retention period is the same for electronic documents as for hard copies.

There is no Insurance Department regulation that specifically addresses the use of electronic technology by an insurance broker. However, as to the maintenance of records by insurance brokers by the use of document imaging technology, the Department has previously taken a position in a letter dated May 17, 1999. In it, the Department suggested that an insurance broker maintain its records in a "durable medium" as defined in N.Y. Comp. Codes R. & Regs. tit. 11 § 243.1(c) (Regulation 152), which regulation establishes rules for the retention of records by insurance companies, so that they remain accessible to the Superintendent for examination purposes. Furthermore, the insurance broker should take reasonable precautions for safeguarding their insurance records and protecting them against the falsification of the information contained in the record.

We further suggest that the inquirer’s New York licensed insurance broker clients also consider how they must maintain their insurance records, which are stored by means of document imaging technology, in order to comply with their responsibilities under the following regulations. Licensees, as that term is defined in N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(1) (Regulation 169), includes insurance brokers. Regulation 169 requires that licensees protect the privacy of a customer’s nonpublic personal financial and health information. N.Y. Comp. Codes R. & Regs. tit.11 Part 421 (Regulation 173) establishes standards for developing and implementing administrative, technical and physical safeguards to protect the security, confidentiality and integrity of a customer’s nonpublic personal information. Insurance brokers must comply with the information protection requirements contained in the foregoing regulations whether they retain records containing such protected information in hard copy or electronic format.

For further information you may contact Associate Attorney Barbara A. Kluger at the New York City Office.