AAI Urges Calif. Legislative Panel Not to ‘Reinvent Wheel’ on Privacy

January 30, 2003

Further burdening insurers with onerous state-specific privacy requirements will only hurt the California insurance market with no corresponding benefit to consumers, a representative of the Alliance of American Insurers (AAI) told a state legislative panel Wednesday.

“There is no reason for the California Legislature to reinvent the wheel in the privacy protection arena,” Rey Becker, Alliance vice president of property/casualty, told an informational hearing of the California Assembly’s Insurance Committee. “Insurers writing in California have been complying with the state’s existing privacy law since 1980. However, insurers writing or wishing to write business in the state are already facing several daunting new California-specific restrictions and mandates. Please don’t add more. The result will be fewer choices and higher premiums for insurance consumers.”

Becker cited the following examples of existing California-specific requirements that aready impede competition:
┬ĚDespite a lack of statutory authority, California Department of Insurance regulations are the only ones in the country to impose burdensome print size requirements for privacy notice language. “All insurers writing business or interested in beginning to write business in the state face additional costs and barriers as a result,” he testified. “This does not promote the availability of homeowners insurance.”
┬ĚDespite a clear conflict with the state’s 22-year-old insurance law, Insurance Department regulations are the only ones in the country to regulate non-workers compensation commercial insurance. “This creates additional costs and barriers for commercial liability insurers writing business or interested in writing business in the state,” Becker said. “This does not promote the availability of contractor’s liability insurance.”

In a review of other states’ privacy laws and regulations, Becker noted that only two states have adopted new “opt-in” regulations for insurance financial information since the enactment of Title V of Gramm-Leach-Bliley: New Mexico and Vermont.

In addition, no states have involved the Attorney General in insurance enforcement, choosing to leave this to the insurance department, and no states have created a new private right of action for insurance. “Let’s not get class-action lawyers involved,” Becker warned.

“Any additional regulation of privacy in California will only be a legislative example of piling on, further discouraging insurers from writing business that California consumers want and need,” he concluded.

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