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TDI Commissioner’s Bulletin B-0002-02 – Uniform Electronic Transactions Act

Feb 8, 2002 | Archive News

TO: REGULATED PERSONS AND ENTITIES, INCLUDING ALL INSURANCE COMPANIES, CORPORATIONS, EXCHANGES, MUTUALS, RECIPROCALS, ASSOCIATIONS, LLOYD´s, HEALTH MAINTENANCE ORGANIZATIONS, MULTIPLE EMPLOYER WELFARE ARRANGEMENTS, THIRD PARTY ADMINISTRATORS, INDEPENDENT REVIEW ORGANIZATIONS, VIATICAL/LIFE SETTLEMENT PROVIDERS, BROKERS, AND OTHER ENTITIES REGULATED BY THE TEXAS DEPARTMENT OF INSURANCE AND AUTHORIZED OR ELIGIBLE TO DO BUSINESS IN TEXAS; AND TO THEIR AGENTS AND REPRESENTATIVES AND THE PUBLIC GENERALLY

RE: The Use of Electronic Signatures and Records in Connection with Marketing and Selling Insurance and Related Products or Engaging in Other Business Regulated by the Texas Department of Insurance.

This Bulletin is intended to provide information to individuals and entities regulated by the Texas Department of Insurance (TDI) and to prompt discussions between the regulated community, consumers and TDI about transacting business electronically.

Advances in electronic technology are allowing businesses, including those regulated by TDI, to integrate various elements of electronic commerce into their operations. The Internet and electronic commerce have resulted in increased conveniences and opportunities for consumers and the industry.

Texas UETA

The 77th Texas Legislature passed and Governor Rick Perry signed SB 393 adopting the Uniform Electronic Transactions Act (Texas UETA). Texas UETA became effective January 1, 2002, and is codified as Chapter 43 of the Texas Business and Commerce Code. In accordance with federal law, Texas UETA qualifies as a statute that will “modify, limit, or supersede the provisions of section 101” (15 U.S.C. §7001) of the federal Electronic Signatures in Global and National Commerce Act (E-Sign). See, 15 U.S.C. §7002; Tex. Bus. & Com. Code §43.019. However, SB 393 does not modify the consumer disclosure provisions of section 101(c) of ESign. See, Tex. S.B. 393, §6(a), 77th Leg., R.S. (2001).

Texas UETA creates a statutory structure in Texas that supports the use of electronic signatures and electronic records in everyday public and business undertakings. Texas UETA addresses the effect of electronic transactions as follows:

  1. A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.
  2. A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.
  3. If a law requires a record to be in writing, an electronic record satisfies the law.
  4. If a law requires a signature, an electronic signature satisfies the law.

Tex. Bus. & Com. Code §43.007. An “electronic signature” is defined as “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” Tex. Bus. & Com. Code §43.002(8). Texas UETA also provides for electronic notarization. Tex. Bus. & Com. Code §43.011; see, also, Tex. Civ. Prac. & Rem. Code §121.004; Tex. Gov´t Code §406.013. Therefore, certain insurance transactions may be conducted through electronic means.

Careful Review of Texas UETA

TDI encourages regulated persons and entities to carefully review Texas UETA and other applicable laws in connection with the use of electronic signatures and records in their business. Regulated persons and entities should develop responsible strategies to address the issues inherent in conducting business electronically. Regulated persons and entities that wish to incorporate the use of electronic commerce should conduct their own review of legal issues and technical capabilities. Regulated persons and entities may also wish to review their current forms and procedures to determine whether they need to be revised to accommodate electronic commerce. In addition, record retention procedures should be reviewed to ensure proper maintenance, security and privacy of electronic documents.

Other Applicable Law

Transactions subject to Texas UETA are also subject to other applicable law. Tex. Bus. & Com. Code §43.003(d). Regulated persons and entities should refer to the other applicable law when seeking to integrate elements of electronic commerce into their business operations. For example, regulated persons and entities should consider the following:

  • Electronic transactions must comply with the privacy requirements of the federal Gramm Leach Bliley Act (GLBA), the federal Health Insurance Portability and Accessibility Act (HIPAA), and related state statutes and rules.
  • Any person or entity that wishes to do the business of insurance in Texas, or engage in other business activities regulated by TDI, in any form, including electronic commerce, must be properly licensed, registered or otherwise authorized to conduct such business in the State of Texas. Surplus lines business must be properly eligible as required in Article 1.14-2 of the Texas Insurance Code.
  • Any Internet site marketing insurance or other regulated products to Texas residents must comply with Texas advertising statutes and rules.
  • Laws requiring that information be produced or made available to TDI also apply to information maintained electronically and information regarding electronic transactions.
  • Contracts, policies and other products marketed to Texas residents by electronic commerce must meet applicable legal requirements, including the following:
    • requirements regarding free look periods;
    • formatting requirements including pagination and type size, as well as requirements that certain language be conspicuous or be placed in a certain location within a document;
    • requirements regarding prior approval; file and use subject to review and/or approval; file for information; and/or exemption from review.

Regulated persons and entities are encouraged to discuss with TDI how these statutory and regulatory requirements may be satisfied.

Voluntary Electronic Transactions

Although transactions may be conducted electronically, Texas UETA provides that the use of electronic records and signatures is voluntary. Texas UETA “does not require a record or signature to be created, generated, sent, communicated, received, stored, or otherwise processed or used by electronic means or in an electronic form.” Tex. Bus. & Com. Code §43.005(a). Likewise, a person who has consented to conduct one transaction electronically, may refuse to conduct subsequent transactions electronically. Tex. Bus. & Com. Code §43.005(c).

Information Filed With TDI

With regard to information required to be filed with TDI, Texas UETA allows Texas state agencies to determine the extent to which the agency will accept, send, create, store, process, use and rely upon electronic records and signatures. Tex. Bus. & Com. Code §43.017. In addition, Texas UETA authorizes the Texas Department of Information Resources (DIR) and the Texas State Library and Archives Commission (SLAC) to adopt rules regarding the acceptance and use of electronic records by Texas governmental entities. TDI is carefully monitoring the activities of DIR and SLAC in implementing Texas UETA.

With regard to information currently required to be filed with TDI, the sole electronic method for rate and form filing is through the System for Electronic Rate and Form Filing (SERFF). The electronic filing of agent appointments may be processed through the National Insurance Producer Registry´s Producer Information Network (PIN). The enactment of Texas UETA does not alter these designations.

Other Issues

There are emerging issues involved in conducting business electronically which will only be clarified over time as the result of court decisions and administrative actions. We look forward to discussing the issues raised by electronic transactions with consumers, agents, companies and other regulated persons and entities in an effort to provide greater market access for the consumer.

Any questions regarding this Bulletin or related issues should be directed to Ann Bright, Section Chief, Agency Counsel Section, Legal & Compliance Division by telephone at (512) 463-6411 or by electronic mail at ann.bright@tdi.state.tx.us

Sincerely
José Montemayor
Commissioner of Insurance