Getting a Grip on GLBA

It feels like the countdown to Y2K. Will we be ready? Will the industry fall apart if we aren’t in compliance with GLBA before the looming date of July 1, 2001?

That’s the day by which agents and brokers must have filed their privacy standards and sent out letters detailing these standards to their policyholders. Doesn’t sound too bad—after all, agencies send out reams of paperwork every day.

But a recent survey conducted by NAMIC revealed that less than half of the states are likely to have their own privacy rules in place by the deadline. The fact that states are lagging doesn’t bode well for individual agencies.

So what happens if we don’t meet the deadline? Are we grounded, sent to bed without dessert, or should we really be worried?

One of the scary things that could happen is that consumers could bring legal actions against agencies or brokerages or other financial institutions that have not complied with the law; in effect, creating a harvest ripe for the picking by plaintiffs’ attorneys. The NAII is calling GLB compliance the plaintiff’s attorneys’ “newest class-action cash cow.”

Procrastination and non-compliance could also lead to potential E&O claims and agency contract terminations. That’s not even to mention the fines and legal penalties that insurance regulators could come up with in the various states.

Some agents will sit back and let the companies send out notices on their behalf.

“We understand that most of our member companies, at least, are sending out the privacy notices and not relying on agents to perform that task for them,” David Reddick, NAMIC market regulation manager, told me. “However, that may not be the case everywhere. Also, I’ve noticed that some national agent organizations have suggested to their members that they may want to send out their own privacy notices.”

According to a recent Reuters story, John Byrne, senior counsel at the American Bankers Association, estimated that there will probably be close to half a million notices mailed. Citigroup alone is sending out an estimated 90 million privacy notices to its customers, and Bank of America is cranking out more than 60 million.

The barrage of form letters from huge, faceless companies could overwhelm the hardiest consumer. Your customers might really appreciate a more personal note from John Jones, independent agent, telling them that you have their privacy at heart and that they can rest easy.

At any rate, it would be a little more believable than the letter I got from my credit card company titled: “We Care About Your Privacy.” I bet they do.

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