Financial privacy legislation that would have limited services to policyholders and increased costs for insurers failed to reach a majority vote Wednesday in California’s Assembly Banking & Finance Committee.
At the hearing, the National Association of Independent Insurers (NAII) argued that Assembly Bill 203 would establish unnecessarily restrictive California financial privacy rules that would undermine state requirements and privacy protections that have been in place and proven effective for nearly two decades.
AB 203 would have imposed privacy requirements on financial institutions, including banks and mortgage lenders, security firms and insurers. The bill’s provision forbidding the sharing of information among affiliates is pre-empted by the federal Fair Credit Reporting Act, which provides that no state may impose such a restriction until 2004.
The bill also would have ventured well beyond the basic privacy provisions in the federal Gramm-Leach-Bliley Act (GLBA) by prohibiting any disclosure of a customer’s information without the customer’s consent, or “opt-in.”
By July 1, insurers are required to at least meet the privacy standards in GLBA. NAII is advocating that states enact legislation that follows GLBA to avoid a hodge-podge of legislation that would be confusing and costly for consumers and insurers. GLBA’s “opt-out” system for financial data mandates that financial institutions provide an annual notice to customers informing them of their right to “opt-out” of sharing their financial information with non-affiliated third parties.
Unlike AB 203, GLBA does not restrict the flow of customer information among affiliated entities.
California’s current privacy law, the Insurance Information and Privacy Protection Act, already gives consumers the right to opt-out of the sharing of information for marketing purposes. Consumers also have the right to inspect their personal information to have erroneous information corrected.
According to the NAII, the defeat of AB 203 also will enable insurers to continue to offer consumers a greater array of services, Sorich said. For example, a young driver who is considered a greater risk most often would not be accepted in a preferred insurance company. But once the driver’s 25 birthday arrives, the driver may then be eligible for a preferred rate. Without the sharing of information between companies’ affiliates, notice of the availability of consumer savings would not be possible.
Was this article valuable?
Here are more articles you may enjoy.