House Passes E-SIGN Act

The House passed a bill Wednesday that would allow consumers and businesses to authorize contractual deals with the click of a button. The proposed E-SIGN Act, approved 426-4, provides for making digital signatures as legally binding as written ones. The bill, which the Senate is expected to take up later this year, would require the establishment of a uniform national standard for transactions otherwise requiring written signatures.

Proponents say the move will save time and paperwork, thereby saving money. And many experts say digital verification will be much more secure than handwritten signatures.

“Consumers and insurers will soon be able to confidently enjoy the convenience of working together electronically,” said John Savercool, vice president of federal affairs at the American Insurance Association. “More than anything Congress does this year, this bill will enable insurers and their customers to take greater advantage of electronic commerce.”

The concept has been compared to the magnetic stripe found on bank and credit cards, where special identifying information is encoded in the stripe and then verified by use of a password. Likewise, the identifying information in a digital signature is embedded in a computer file installed with a computer’s browser. Once an e-mail or document is sent electronically, the recipient has to have the technology to verify the sender’s identity. The encryption also guarantees that the document has not been doctored.

While the proposed law would allow consumers and businesses to sign checks, complete loan applications and contract services online, the old-fashioned pen signature will still be required for some contractual agreements, including the cancellation of critical services like power, water and gas. Also included would be court orders, eviction notices, cancellation of health or life insurance, product recalls and the paperwork accompanying the shipping of hazardous materials.

President Clinton’s signature enacting the bill into law will also have to be done the old fashioned way—with a pen.

Although the House vote was almost unanimous, a number of Capitol Hill critics of the E-SIGN legislation were concerned that consumer protections now in place for paper transactions would be weakened. Many in the insurance industry view the issue as merely an added choice for consumers.

“AIA and our over 370 companies recognize that the Internet is not for everyone,” Savercool said. “This bill of e-signature legislation would simply provide many individuals and businesses the option of buying insurance electronically. It does not supplant the need to maintain the option of a traditional consumer-insurer relationship.”