Cyberspace and Insurance

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Insurance and the Internet The business of insurance on the Internet has entered a phase of considerable growth. Though, for example, only about 4% of life insurance was being sold over the Internet by early 2002, life and other lines of insurance is expected to see increasingly more policies purchased online in the coming years. Insurance transactions are well suited to the electronic medium. At each stage of the insurance transaction - solicitation and applications, underwriting and policy issuance, and claims adjusting and payment - the necessary information exchange can take place online. A National Association of Insurance Commissioners (NAIC) white paper contained an appendix with a forty-eight state survey of insurance regulators addressing Internet insurance sales issues. The regulators indicated that the three most important areas of concern regarding Internet insurance sales are: Unlicensed / unauthorized companies and producers Fraud Misleading or deceptive advertising and marketing The white paper also addressed the issue of data security, information privacy, and advantages and disadvantages of Internet insurance sales for consumers, insurers and regulators. Though the NAIC has made significant strides in achieving greater uniformity of state insurance laws, the existing state insurance laws and regulations do not lend themselves well to the "borderless" transactional environment of global e-commerce. At the most fundamental level, each state requires licensure for any activity that constitutes "transacting insurance". At this time, no uniform model state law exists on the subject of Internet insurance. The fifty-state insurance regulatory environment in the United States hinges upon distinct geographical concepts: The "domiciliary state" of the insurer The residence of a policyholder The "site" of a risk, etc. The Internet, however, does not have a distinct location.

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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.