WSR 98-01-118

PROPOSED RULES

INSURANCE COMMISSIONER'S OFFICE

[Filed December 18, 1997, 11:50 a.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 97-23-077.

Title of Rule: Electronic authentication (digital signatures).

Purpose: Establish and clarify the application of the Electronic Authentication Act (chapter 19.34 RCW) to the Insurance Code and regulations.

Other Identifying Information: Insurance Commissioner Matter No. R 97-6.

Statutory Authority for Adoption: RCW 48.02.060.

Statute Being Implemented: Title 48 RCW.

Summary: The rule establishes and clarifies that documentation can be "delivered" electronically, and that "writing" and "signature" and related terms apply as provided in the Electronic Authentication Act.

Reasons Supporting Proposal: The application of these provisions might be unclear without the rule, or harder to identify.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: G. W. Taylor, P.O. 40257, Olympia, WA 98504, (360) 438-7696.

Name of Proponent: Insurance Commissioner Deborah Senn, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: Various laws and rules currently phrase requirements assuming that all transactions occur using-paper documents, and assuming that all transactions will happen face-to-face or over the phone. There are currently requirements that disclosure notices must be delivered or left with the consumer. The proposed rule would clarify or establish how an insurer can comply with delivery requirements, and other similar current laws and rules, where transaction is accomplished by electronic communications. It would also establish standards for what constitutes "signature" and "writing" under the Insurance Code and rules.

Proposal does not change existing rules.

A small business economic impact statement has been prepared under chapter 19.85 RCW.

Introduction: This report analyzes a proposed rule related to the application of the Electronic Authentication Act (chapter 19.34 RCW). The proposed rule clarifies disclosure delivery requirements and other similar current rules, where the transaction is accomplished by electronic communication. This evaluation is completed to demonstrate that the proposed rule produces probable benefits while imposing no additional costs on the regulated industry.

Background: Various laws and rules currently phrase requirements assuming that all transactions occur using paper documents, and assuming that all transaction will happen face-to-face or over the phone. There are rules that currently require insurers to deliver disclosure notices to consumers. The proposed rule would clarify or establish how an insurer can comply with delivery requirements, and other similar current laws and rules, where the transaction is accomplished by electronic communications.

Federal Law and Other State Law: This rule does not conflict with any other state or federal law or rule.

Industry Codes: The proposed rules would potentially affect all insurance companies (industry codes #6311, #6321, #6324, #6331, #6351, #6361, #6399, #6411).

Probable Costs: The proposed rule does not impose any costs on the regulated industry. The proposed rule improves the efficiency and clarity of regulation concerning the Electronic Authentication Act. The rule does not restrict current delivery requirements and does not impose new filing requirements. The commissioner recognizes the potential for costs associated with the time required to read and comprehend the proposed rule. These probable costs would be insignificant relative to the benefits associated with the proposed rule.

Probable Benefits: The proposed rule would clarify the application of certain parts of the Electronic Authentication Act (chapter 19.34 RCW) to the Insurance Code and regulations. The rules produce benefits for both insurance companies and insureds. In some situations, paper and ink transactions prove to be expensive, slow, cumbersome, and inefficient relative to modern electronic modes of doing business. The proposed rule improves the efficiency of these transactions by allowing for electronic transactions to substitute for many of the more burdensome paper transactions. The rule is set up to accommodate new and easier methods of doing business as long as these practices are fair to insureds and insurers.

Small Business Impact: The proposed rule does not impose a disproportionately higher economic burden on small businesses within the four-digit classification. There are no filing requirements associated with the proposed rule. The rule is being proposed to permit more flexibility and improve the efficiency of business transactions in the insurance industry. Small businesses will not be required to change their business practices to comply with the proposed rule.

Mitigation: Mitigation to reduce the economic impact of the proposed rule on small businesses is not necessary because there are no cost impacts on small businesses. The proposed amendments could be considered a form of mitigation because they provide potentially more benefits to both insurers and consumers, without imposing costs on the regulated industry.

Industry Involvement: Businesses that will be affected by the proposed rule were invited to provide input to the commissioner's staff throughout the rule-writing process. A Preproposal Statement of Inquiry was filed for the rule on November 19, 1997. All comments received by the commissioner have been in support of this rule.

Conclusion: The proposed rule increases the potential benefits to insureds and insurers without increasing the costs of compliance. The proposed rule also clarifies requirements related to the Electronic Authentication Act. The rule does not impose any direct costs on the regulated industry. The proposed rule benefits insurers as well as insureds. Because the rule increases potential benefits without imposing any direct costs on insureds, it is reasonable to conclude that the probable benefits of this proposed rule are greater than probable costs.

A copy of the statement may be obtained by writing to Kacy Brandeberry, P.O. Box 40255, Olympia, WA 98504-0256, Internet e-mail KacyB@oic.wa.gov, FAX (360) 407-0351.

RCW 34.05.328 does not apply to this rule adoption. This is an "interpretive rule" within the meaning of that law.

Hearing Location: Conference Room Downstairs, RoweSix, Building 4, 4224 6th Avenue S.E., Lacey, WA, on January 27, 1998, at 9:00.

Assistance for Persons with Disabilities: Contact Steve Carlsberg by January 23, 1998, TDD (360) 664-3154.

Submit Written Comments to: Kacy Brandeberry, P.O. Box 40255, Olympia, WA 98504-0256, Internet e-mail KacyB@oic.wa.gov, FAX (360) 407-0351, by January 26, 1997 [1998].

Date of Intended Adoption: January 30, 1998.

December 18, 1997

Greg J. Scully

Chief Deputy Commissioner

NEW SECTION

WAC 284-01-050 Provisions relating to electronic authentication. (1) The term "deliver" as used in Title 48 RCW and Title 284 WAC includes delivery by message, as "message" is defined in RCW 19.34.020. Where any provision in Title 48 RCW or Title 284 WAC requires that a writing be given or mailed to someone or left with someone or the like, the requirement is satisfied by delivery of a message, as "message" is defined in RCW 19.34.020.

(2) Where any provision in Title 48 RCW or Title 284 WAC requires that something be "written," or otherwise requires a writing, that requirement is met by anything that is a "writing" within the meaning of RCW 19.34.320.

(3) Where any provision in Title 48 RCW or Title 284 WAC requires that something be "signed," or otherwise requires a signature, that requirement is met by anything that is deemed "signed" under RCW 19.34.300.