Agent Groups Ask Regulators To Clarify Privacy Requirements

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The initial rush to put privacy guidelines in place to comply with a 1999 financial services law is over and efforts are now turning to refining and clarifying these requirements.

Agents shared their concerns at a recent public hearing held to discuss what states still need to do to polish privacy guidelines now in place. The meeting was held by the National Association of Insurance Commissioners.

The Gramm-Leach-Bliley Act of 1999 required privacy standards to be created within a year after its enactment, but regulators pushed back the effective date for insurers to July 1, 2001 to permit substantive work to be done.

Agent groups–including the National Association of Insurance and Financial Advisors, Falls Church, Va.; the National Association of Professional Insurance Agents, Alexandria, Va.; and the Independent Insurance Agents of America, Alexandria, Va.–sought clarification on the breadth of a producer exemption in a draft regulation being used as a template in many states.

In particular, they asked regulators to create consistent treatment for independent agents. One element of the exemption says the exemption exists if “the licensee does not disclose any nonpublic personal information to any person other than the principal or its affiliates.”

The agent groups also asked for guidance over how customer information should be treated when an independent agent “shops a policy” to a number of carriers.

In a separate letter, the National Association of Health Underwriters in Arlington, Va., argued similar points, noting the burden that would result if independent agents had to provide every client with the same notifications and authorizations required of an insurance carrier.

NAHU said that unlike insurers who can raise premiums to offset compliance costs, producers receive set commissions for their work.

Matthew All, assistant commissioner with the Kansas insurance department, says regulators want to balance the practice of shopping a policy and the fact that consumers may want that service with the desire to know how private information is being treated.

“We are looking for a flexible way to handle this issue,” he says, adding that regulators have different opinions on the issue that still need to be reconciled. However, he notes, a simple way of making customers aware that private information may be used when shopping a policy would be to inform the customer at the beginning of a relationship.

The use of “principal” also needs clarification, according to William Anderson, vice president and associate general counsel with NAIFA. “Is it one principal or all principals?” he asks. “The last thing we want is different states taking different interpretations.”

Different states could take different stances on whether an independent agent, particularly a health or property-casualty agent, needs to send out a separate notice from the privacy notice sent by a customer’s current carrier if they are shopping a policy, Anderson continues.

In a letter to the NAIC, the agent groups said states like Florida offered a broad enough interpetation of an exemption or safe harbor from the notification requirements for GLB to cover independent agents, but other states might not.

During the hearing, it was decided that a reconstituted privacy working group would draft model consumer privacy notices understandable to the public and uniform in different states.

An effort is being made to establish “clarity and understanding in these notices so that customers know what they are getting,” says Debra Ballen, executive vice president of the American Insurance Association in Washington.

The concept of uniformity was conveyed by Michael Lovendusky, senior counsel with the American Council of Life Insurers, Washington, who recommended that NAIC endorse an industry reconciliation between the NAIC Privacy Model regulation adopted last year and the NAIC Privacy Model Act adopted in 1982.

Additionally, ACLI also expressed concern on implementation of regulations in specific states, including Alaska and Vermont.

Rey Becker, vice president-property-casualty with the Alliance of American Insurers in Downers Grove, Ill., says NAIC needs to work with states to ensure uniformity from deviations in the NAIC model regulation.

Any work on creating uniform privacy notices would be all right if it did not require companies to do something very different from what they are required to do now, he adds.

All, the Kansas regulator, says well over the majority of states have uniform privacy standards. Regulators will work to create greater uniformity for those states that do not conform to uniform standards, he says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, August 20, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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