04 March 2010

A two-part series on records management and document retention policies for insurance agencies.

I'll never forget the first time an insurance agency asked me about adding document management to its agency system. It was in the mid 1980s and I was helping an agent in west Georgia. He had just installed a new 60 MB hard drive in his agency management system-he was excited about his new disk space and we talked about how to put it to good use. What if we used that extra space to store electronic images of agency documents? He had just started faxing, so we discussed faxing agency documents to himself and saving them on the disk as electronic files.

Good idea, but then we did the math. A 66-page scanned personal-lines policy with standard endorsements would have taken up nearly 5 percent of the available storage space. Since his drive was a $1,000 device, it would have cost nearly $50 just to store one document. We struck a compromise-faxing (scanning) and storing the most critical and often-used documents.

Fast forward to the 21st century, where terabyte drives are commonplace: That same block of storage to save the 66-page policy in electronic form would now cost fractions of a cent.

This is, indeed, wonderful technology that allows agencies to easily centrally store all their documents. I often talk to agents about becoming paperless and, when we discuss how long they want to store records, they answer: "Everything, forever." If, or when, they run out of space, they plan to add more disks because of the low cost of disk space. While this can be done, is it the right decision? Viewed another way, if you had a warehouse with unlimited physical storage, would you keep every paper document forever?

When I discuss this with agents, sometimes I hear that they were able to find an obscure old piece of information that helped an insured or carrier out of a bind; but rarely is there an indication that finding same long-lost document was the key to avoiding a huge judgment or winning a case. Most agencies purge their paper files at some point. While document management systems can store virtually unlimited archives of customer files forever, it is not a good practice. I recommend that agencies consider implementing document retention policies.

I'm not an attorney or an errors-and-omissions expert, but I have had extensive discussions with those who are, and I encourage you to seek their advice. Consider the following in light of the E-Discovery Rules as amended in December 2006 and the court procedures for civil suits (the Federal Rules of Civil Procedure):

• Common sense will tell you that the longer you hold a piece of information, the less likely it will be worth keeping for your benefit. Retaining more information means that there is more to look through to find what a particular document contains. There still is a cost associated with storage and backup and it takes more time to search longer histories.
• Events of the last few years have proven that, no matter how careful you are, someone can call your actions into question and force you to document and prove the history of a transaction; often this is done formally in the discovery process. Requested information must be turned over within 120 days after a complaint has been served.
• In today's paperless world, discovery likely will include all agency records, especially electronic ones that are easier to browse. One judge has commented that it is beyond doubt that the computerized data is discoverable, if relevant.
• Any agency records (like e-mails, spreadsheets, images or documents), must be produced either in their original form or in usable form like a searchable file when required to do so. If you feel that it is cost-prohibitive to produce this information, you have to prove it.
• If you have retained information in multiple forms (like a paper and an electronic copy of a document) you may be required to produce all forms in which it was retained. As long as the electronic copy is the same as the original at the time of scan, there is no legal benefit I can think of for you to keep a paper copy.

Rusty Keighron
Insurance Practice Manager
docSTAR Document Management Software
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