IBA West Urges Delay On Privacy Rules

The California Department of Insurance (CDI) should delay new regulations until the Legislature decides whether or not to substantially change state privacy laws, IBA West testified recently.

At a public hearing in San Francisco on new proposed privacy regulations, IBA West General Counsel Steve Young also urged the Department to exempt “mere renewal” activities, expand the grounds for sending privacy notices via e-mail, and make other changes in proposed privacy regulations.

“We agree with the Department of Insurance that regulations on this subject are desirable; however, we believe that promulgation should be delayed for at least six months to a year,” Young said. “The statutory and national regulatory landscape is anything but certain….”

Young said insurance agents and brokers, and other providers of “financial” products and services, worked feverishly last summer to meet the initial privacy notification requirements of the Gramm-Leach-Bliley Act (GLBA). As proposed, Young said the regulations would require almost every licensee to significantly alter their privacy policies and notices.

IBA West also urged CDI to amend the regulations to permit insurance agents and brokers to use their customers’ non-public personal information with other insurance companies on renewal without being required to send an “opt-out” notice.

“When a consumer goes to an independent insurance agent or broker, they do so in most cases because they want the recommendations of an independent insurance professional on companies, coverages, claims, and other aspects of insurance transactions,” Young testified. “It makes no sense whatsoever to require an insurance licensee to provide an opt out form when an existing customer’s policy comes up for renewal, or to bombard the consumer with (yet another) notice and form.”

In addition, IBA West urged CDI to change the regulations to permit agents and brokers to send privacy notices electronically, with their customers’ consent; as drafted, the regulations would also require that the consumer purchased the insurance product or service electronically.