The types and uses of eSignatures
Throughout human history, signatures have been a way to identify key individuals in important matters of government, law, and finance. As the Internet became increasingly popular in the late 1990s, a new form of personal identification burst onto the scene: the electronic, or digital signature. As lawmakers and regulatory bodies rushed to define the legal parameters of this new technology, consumers embraced the speed and convenience that is offered.
Nowadays, there are several types of eSignatures considered to be legally binding across a broad spectrum of industries. The following information will discuss the three common types of eSignatures, as well as specific laws and use cases related to this innovative method of verification.
The 3 Types of eSignatures
Legislative bodies have divided eSignature types into 3 basic categories. For example, the European Union's eIDAS regulation, developed in 2014 and enacted in 2016, defines these 3 categories as:
- Simple (or basic) electronic signatures
- Advanced electronic signatures
- Qualified electronic signatures
There are some key differences between these eSignatures types:
- Simple electronic signatures are the broadest type of electronic signature. They are defined as "data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign." In many cases, simple electronic signatures are considered legally binding. However, for certain documents, higher qualifications must be met.
- Advanced electronic signatures are signatures that have an "electronic seal" attached to them. In other words, they are transmitted via an "electronic registered delivery service" that can provide evidence regarding the handling of the transmitted data. These signatures are typically certified by an independent Certificate Authority (or CA).
- Qualified electronic signatures are advanced electronic signatures that meet additional requirements. For example, qualified eSignatures must have a certificate based on public keys that were issued on a cryptographic card (or equivalent device) with a double factor of authentication. There also must be prior identification of the signatory by an audited entity.
Put simply, the 3 types of electronic signatures can be classified according to security level: the simple electronic signature is the least secure of the three, and the qualified electronic signature is the most secure.
Laws and Use Cases for eSignatures
In the United States, there are 4 basic tenets upon which the legality of an eSignature rests:
- Signatory intent. As with handwritten signatures, there must be clear evidence that the signatory intended to sign his/her name to a document.
- Consent to sign electronically. Both parties to a contract or other document must clearly express their consent to perform vital business tasks (such as signing) via electronic means. There are a few exceptions to this rule, such as when one party has previously consented to the use of electronic signatures and has not expressly withdrawn that consent.
- An accurate corresponding record. The electronic signature platform used for any transaction must keep a record associated with the signature that can accurately demonstrate the process by which the signature was created.
- Record retention. The record of an electronic signature must be accurately reproduced and available for the files of any party entitled to such data.
In most cases, eSignatures that adhere to these guidelines are considered legally binding.
In the United States, there are several laws that govern the efficacy and usage of eSignatures. These include industry-specific laws, such as the FDA's 21 CFR Part 11 regulation, which gave electronic signatures the same legal impact as "wet ink" signatures in 1997. In addition, the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act (ESIGN), introduced in 1999 and 2000 respectively, identified and validated the importance and legitimacy of electronic signatures on a national level.
In the United States, there are still some use cases in which eSignatures would not be appropriate, such as:
- The drafting/validation of wills, codicils, and testamentary trusts
- The creation of official court documents
- The development of adoption, separation, or divorce agreements
- Termination of life insurance benefits
- The documentation for the handling of hazardous/toxic substances during transport
- The creation of any contracts governed by the UCC (Uniform Commercial Code)
In European countries, there are some variations in the framework and application of electronic signature law. For example, Germany subscribes to the EU's eIDAS regulation, which means that in the majority of cases an eSignature is not only considered legally binding in Germany but would also be considered legally binding in the EU's other member states. In addition, the eIDAS regulation gives a qualified electronic signature (QES) the same legal force as a handwritten one.
Nevertheless, there are different tiers of eSignature legitimacy in Germany. For instance:
- Simple electronic signatures are generally suitable for consumer agreements (such as policies, invoices, and user manuals), commercial contracts, HR documents.
- Qualified electronic signatures are required for court documents, consumer credit/loan agreements, and certain lease/rental documents, include notices of termination and leases based on index rent.
- Documents that require notarization are not compatible with electronic signatures.
All in all, many companies in the US and Europe are trending towards the implementation of advanced electronic signature technology. There are many benefits of eSignature in insurance and banking. For instance, banking agreements and insurance policies can both be validated by electronic signatures, making once tedious processes simpler and more streamlined.
The Importance of Capturing Qualified eSignatures
While basic electronic signatures have their place, an increasing number of businesses have ensured that their eSignature platform allows for the capture of qualified electronic signatures. Qualified eSignatures provide the strongest legal evidence in case of a dispute over a digital transaction, and can help protect both consumers and corporations from identity theft and other forms of fraud.
For companies in the insurance and banking industry, EasySend's signature tool provides a qualified, legally binding solution for a wide range of eSignature needs. Whether it's the issuance of a new policy, the setup of an account, or any other electronic transaction, EasySend makes it easy, intuitive, and secure. If you would like to learn more about our no-code platform, schedule a demo with us today!