The Office of General Counsel issued the following opinion on February 28, 2003 representing the position of the New York State Insurance Department.
Re: Paper Documentation Fee
This is in response to your recent request for an opinion.
May an insurer charge a fee for providing a paper copies of policies and other documents to an insured who chooses to have them in paper rather than electronic form?
Yes. Provided that in the process of obtaining the insureds consent to carry out the transaction electronically, the insurer discloses that there will be a fee if the insured opts for paper documentation, the insurer may charge a fee for a paper copy of a record that it can properly transmit electronically. There is nothing in either the New York Insurance Law or the Electronic Signatures and Records Act ("ESRA") that would prohibit an insurer from charging such a fee.
It is the insurers standard practice to provide all of their policyholders with copies of their policies and other documents via electronic delivery, which, because of the companys structure, is more efficient for the company. The company submitted support of its costs for supplying paper documentation and would like to introduce a fee to cover its processing costs for paper documentation. That fee would be $25.00 and would be applied if the insured chose to have paper policy documents and other notices delivered through the U.S. mail rather than receive them electronically.
New York State enacted 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, N.Y. State Tech. Law §§ 101-109(McKinney Pamphlet 2002). ESRA establishes a legal framework in New York for the conduct of electronic commerce. Pursuant to N.Y. State Tech. Law § 105(3) (McKinney Pamphlet 2002), electronic records are given the same force and effect as records not produced by electronic means. Section 109 provides that the use of an electronic record must be voluntary. An entity or person is not required to use an electronic record, unless otherwise provided by law.
The federal "Electronic Signatures in Global and National Commerce Act" (E-Sign), 15 U.S.C.A. §§ 7001-7031 (West Supp. 2002), provides that electronic records may not be denied legal effect, validity or enforceability solely because they are made electronically. Under E-Sign, consumers must consent to the use of an electronic record. E-Sign also contemplates that a fee may be charged for paper copies. See 15 U.S.C.A. § 7001 (West Supp. 2002). Specifically, 15 U.S.C.A. § 7001(c)(1) (West Supp. 2002) provides, in pertinent part:
(c) Consumer Disclosures.-
Consent to Electronic Records.-Notwithstanding subsection (a), if a statute, regulation or other rule of law requires that information relating to a transaction or transactions in or affecting interstate or foreign commerce be provided or made available to a consumer in writing, the use of an electronic record to provide or make available (whichever is required) such information satisfies the requirement that such information be in writing if
(A) the consumer has affirmatively consented to such use and has not withdrawn such consent;
(B) the consumer, prior to consenting, is provided with a clear and conspicuous statement
(i) informing the consumer of (I) any right or option of the consumer to have the record provided or made available on paper in nonelectronic form, and (II) the right of the consumer to withdraw the consent to have the record provided or made available in an electronic form and of any conditions, consequences (which may include termination of the parties relationship) or fees in the event of such withdrawal. . . . (Emphasis added).
By the use of the phrases "any right or option of the consumer to have the record provided or made available on paper" and "or fees in the event of such withdrawal", the above cited disclosure requirement contemplates that a fee may be charged for providing paper documentation. Moreover, there is no provision in the New York Insurance Law or in ESRA that would bar a company from charging a fee for a paper copy of a record that the company can properly transmit electronically. 1
You state that it is the insurers standard practice to provide all of their policyholders with copies of their policies and other documents via electronic delivery, which, because of the companys structure, is more efficient for the company. Under both E-Sign and ESRA the use of electronic records and signatures is voluntary and there is no requirement that any entity or person use an electronic record or an electronic signature unless otherwise provided by law. Accordingly, an insurer should obtain the insureds clear consent to carry out the transaction electronically.2
The foregoing should not be construed as the Departments approval or acceptance of the dollar amount specified in your inquiry. The expense of providing copies of policies and other notices to policyholders arise as part of the issuance of the policy and relate to expenses incurred on behalf of insureds generally. Accordingly, this expense is within the rating structure of each affected line of insurance and each must be included as part of the manual rates filed with the Department for approval pursuant to Article 23 of the Insurance Law. Because the expense of providing insureds with copies of their policies and other notices has already been factored into the companys current filing, the companys rate structure for each affected line of insurance would have to be amended to reflect the separation of policy issuance costs from other expenses previously included in your ratemaking calculations. For further guidance you should contact the Property Bureau.
I trust this is responsive to your inquiry.
For further information one may contact Supervising Attorney Joan Siegel at the New York City Office.
1 However, a document such as an FS-20 (New York State Insurance ID Card) which is not available electronically must be provided in paper form.
2 Please refer to Circular Letter No. 33 (1999) for guidance concerning the use of electronic signatures and records in connection with the marketing and sale of insurance by means of electronic commerce.