Privacy Battle Waged On Three Fronts

Washington

The insurance industry is fighting privacy battles on a numberof fronts, opposing federal legislation the industry believesunnecessarily inhibits legitimate commerce.

The primary bills are moving through the Senate, covering theuse of Social Security numbers, commercial e-mail and onlineprivacy. In each case, the insurance industry complains that thelegislation, while well-intended, imposes unfair costs and burdenson insurers.

Looking first as Social Security numbers, the Senate JudiciaryCommittee recently approved S. 848, introduced by Sen. DianneFeinstein, D-Calif., that would prohibit the sale or display ofSocial Security numbers to the public. The bill is aimed atfighting the growing problem of identify theft, which Sen.Feinstein said increased by 500 percent from 1998 to 2001.

The bill would prohibit the sale or display of a Social Securitynumber without the individuals consent, except for certainbusiness-to-business or business-to-government transactions. Inaddition, it would give consumers the right to refuse to give outtheir Social Security numbers to companies and to enforce theirrights with a private right of action.

“This legislation strikes a balance between the need forlegitimate business uses of the Social Security number and the needto prevent identity theft,” Sen. Feinstein said.

But Jim Pitts, executive director of the Washington-basedFinancial Services Coordinating Council, said S. 848 would imposeunnecessary costs and burdens on financial institutions withoutproviding additional protection to consumers. He said theGramm-Leach-Bliley Act already places significant restrictions onthe use of Social Security numbers. “No further regulation of theindustry is needed,” he said.

Moreover, Mr. Pitts said, S. 848 is self-defeating. He saidSocial Security numbers provide the best identifier that financialinstitutions can use to determine whether a person is who he sayshe is. “Without access to this unique identifier, crimes likeidentity theft, fraud and money laundering would be more rampant,”Mr. Pitts said.

FSCC members include the American Insurance Association, theAmerican Council of Life Insurers, the American BankersAssociation, and the Securities Industry Association, all ofWashington.

S. 848 will next be considered by the Senate FinanceCommittee.

On commercial e-mail, or “spamming,” the Senate CommerceCommittee recently approved unanimously S. 630, sponsored by Sens.Conrad Burns, R-Mont., and Ron Wyden, D-Ore., that would requiree-marketers to allow recipients of commercial e-mails to opt out ofreceiving any further communications. It would subject e-marketerswho intentionally disguise their identities to criminal penalties.Those who violate the act could be fined up to $1.5 million.

Sen. Burns said spamming causes consumers to waste both time andmoney. “On this issue, either you are for the consumer or againstthe consumer,” he said. “There is no middle ground.”

However, David Winston, vice president of government affairs forthe National Association of Insurance and Financial Advisors inFalls Church, Va., said that S. 630 unduly burdens and restrictslegitimate commercial e-mails.

He noted, for example, that the bill requires all business toprovide an opt-out notice to all customers dating back three years.This requirement, he said, would force all NAIFA members toretroactively review their entire database and retrieve informationnecessary to comply with the requirement.

Moreover, he said, the bill imposes strict liability one-marketers, meaning that businesses can be held liable forinadvertent violations, giving rise to enormous cumulativeliability exposure, even if there is no showing of actual harm.

Finally, the Senate Commerce Committee approved and sent to thefloor of the Senate S. 2201, which would bar commercial Web-siteoperators from collecting or disclosing personally identifiableinformation of a user without clear and conspicuous notice,including notice of their right to opt out. The bill would allowprivate lawsuits against violators.

The committee approved S. 2201 by a 15-8 vote, but aparliamentary maneuver delayed its movement to the floor of theSenate. That maneuver was overcome recently and the bill was sentto the floor.

Mr. Pitts said S. 2201 would create a flood of new and frivolouslitigation and result in increased costs to consumers. Moreover, hesaid, it would have a disproportionate impact on financial servicesfirms because it does not include exceptions for normal businesspractices that are at the core of providing financial services.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, May 27 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.