Calif. Poised to Adopt Financial PrivacyLaw

Aug 25–The California Legislature has passed stringentfinancial privacy legislation that Gov. Gray Davis is expected tosign.

According to an insurer trade group, the bill that was approvedwould give consumers even stronger privacy protections thanafforded by the federal Gramm-Leach-Bliley Act.

“We opposed the bill and wrote to the governor about it, buthell probably sign it,” said Sam Sorich, president of theSacramento-based Association of California Insurance Companies.

Mr. Sorich noted that insurers got swept into a privacy measurethat in fact was aimed at other types of financial institutions.“The allegations made [by consumer groups backing the bill] didntreally apply to insurers,” in Mr. Sorichs opinion.

“In California, insurance company privacy practices have beenregulated for 20 years. But the practical impact is that [thelegislation] will negatively affect our member companies,” Mr.Sorich added.

The bill would require financial institutions such as banks andinsurance companies to get permission from consumers before sharingpersonal data with other companies, whether those other companiesare affiliated with the financial institution or not.

Explaining the difference between GLB and the California bill,Mr. Sorich pointed out that, for non-affiliated companies,consumers have to opt-out under GLB if they dont want theirinformation shared. As respects affiliated companies, GLB allowsthe financial institution to share customers personalinformation.

Under the California bill, there is no sharing amongnon-affiliated companies unless the consumer opts-in. And consumerswould have the option of opting out if they dont want informationshared with an affiliate of the financial institution.

“It doesnt make sense to have a California-only set of privacyrules for insurers operating nationwide,” Mr. Sorich said. “The lawalso would hamper insurers ability to notify customers of otherproducts and services they may need.”

(Check NUs Online News Service atwww.nationalunderwriter.com for updates on the billssigning.)

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, September 1, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.