The National Association of Independent Insurers (NAII) testified that privacy notification language being developed for insurers as a guideline should be i
dentified as a “safe harbor” rather than a “best practice” model in order to avoid unnecessary litigation. The National Association of Insurance Commissioners (NAIC) created a task force to develop sample language that insurance companies can use when sending privacy opt-out notices on personal financial information to policyholders.
There was some concern among regulators, the industry and other interested parties that customers were having difficulty understanding the initial notifications.
The NAIC Task Force was created to address those concerns and met recently at the NAIC Winter Meeting in Chicago. Although Task Force has not created the actual sample language yet, the area of greatest discussion centered not on the wording of the sample privacy notification but on whether the finalized language should be a best practices model or merely guideline language deemed a “safe harbor.”
“A safe harbor designation for the privacy notification developed by the NAIC would protect insurers from frivolous litigation by allowing a company to have a choice about keeping its own privacy language as long as it complies with the provisions in the federal Gramm/Leach/Bliley Act,” NAII Insurance Services Counsel Kathleen Jensen testified. “Keep in mind that many insurance companies have already developed and mailed privacy notifications to customers. This task force’s intent, as understood by NAII, was to develop guideline language to assist companies in better communicating with policyholders on privacy options. The goal of assisting companies in their communications should include the flexibility of allowing companies to decide what the best language is without creating a scenario that sets up a standard on privacy notification that must be adhered to by all companies. The only benefactors of that action would be trial attorneys who would view the designation as an open door to file more lawsuits against companies.”
The NAIC Task Force agreed to create a subgroup that will develop the sample language for the privacy notifications. The Task Force will review the comments made on best practices and safe harbor designation in the coming months.