NAIC Approves Amendment to Privacy Model Regulation

September 11, 2002

Requiring workers’ compensation insurers to send an annual privacy notice to their employers is not necessary and will result in added administrative costs, insurers told regulators, during the National Association of Insurance Commissioners’ (NAIC) meeting Sept. 10 in New Orleans.

The National Association of Independent Insurers (NAII) criticized the action of the (NAIC) Privacy Issues Working Group when it approved the amendment to the 2000 Privacy of Consumer Financial and Health Information Model Regulation. Currently the model allows notices to be sent to employers’ as an option.

NAII opposed the amendment because its members say that to amend a two-year old model that states have already adopted only adds confusion on privacy issues and makes compliance more difficult and costly for insurers.

“First and foremost, the Gramm-Leach-Bliley Act and the 2000 NAIC Privacy Model Regulation were limited to ‘policies for personal, family and household purposes only.’ This clearly excludes any commercial policies,” NAII senior director and counsel Michael Koziol, said. “NAII’s concern with this amendment is basic, beginning with our opposition to the original NAIC model’s inclusion of any commercial lines, including workers’ compensation. The requirement is counter-productive because in efforts to comply with this amendment insurers will incur more administrative red tape and added costs.”

Koziol also pointed out that the amendment creates an unlevel playing field between other financial institutions and the insurance industry since it is not consistent with the Gramm-Leach-Bliley Act and therefore, not required of other financial institutions that must comply with the Act.

The NAII said it would urge regulators to drop this amendment. The amendment must now go to the Executive and Plenary Committees for full adoption by the NAIC.

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