The California Department of Insurance has announced that California agents must comply with new privacy regulations effective March 24, 2003. The new stipulations will unite the Gramm-Leach-Bliley Act (GLBA) with the Insurance Information Privacy and Protection Act (IIPPA) that is currently contained in the Insurance Code. Current laws that protect consumer privacy will also be implemented.
These changes will affect insurance producers’ business in several aspects. To ensure that policyholder information is protected, there are new security requirements. How client files are secured and how firms market, collect, and share consumer information with third parties will change. Cal-GLBA’s biggest impact, however, is the required implementation of a new, hybrid version of the “Opt-Out/Opt-In” system with enhanced privacy requirements.
An agent shopping for replacement coverage without first consulting his or her policyholders must provide those policyholders with an opt-out notice (this is in addition to the annual notice already required by the GLBA). Shopping for replacement coverage is not the servicing of a policy, the Department maintains, but is instead considered marketing. Therefore, it should be subject to an opt-out notice.
Agencies and brokerages must comply or face negative consequences.
The Commissioner has the authority to audit compliance of the new laws and penalize those who do not follow the regulations and the underlying statutes. In addition, producers may be subjected to potential E&O claims and agency-contract terminations. Finally, consumers have the right to bring legal action against agencies, brokerages, and other “financial institutions” that misuse their non-public information.
The Insurance Skills Center will be holding two-hour workshops throughout California to inform agents of the new regulations and teach them how to comply. The class will distribute the necessary compliance forms and provide examples of opt-out and annual notices. The workshops will be held in Jan. and Feb. of 2003 and cost $45 per person. For more information on the workshops, please contact Shari McHugh of CCIP at 916-326-5290 or Steve Young of IBA West at 510-285-3606.
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