Going Overboard On Privacy Could Hurt Web Consumers

In the Internet age, everyone is understandably more leery about their privacy. No one wants “the wrong people” to have access to their personal data. Or even “the right people” for “the wrong reasons,” for that matter.

Still, there is an element of paranoia in the privacy rights campaign that, if left unchecked, could do more harm than good. Thus, our concern is focused on a bill introduced in the U.S. Senate by Commerce Committee Chairman Ernest F. Hollings, D-S.C.

S. 2201, which was approved by the Commerce Committee in a 15-8 vote, would lay out overly restrictive regulations governing the collection and disclosure of “sensitive” personal information by Internet service providers or operators of commercial Web sites.

Insurance companies and agents are rightfully speaking out against the bill, which the industry contends could undermine or perhaps even terminate the online sale of insurance. If that turns out to be the result, it would be a blow to consumers, who would have a valuable option denied to them in buying coverage.

Of course, insurers certainly haven’t done a great job selling insurance online. Our own tech editor, Ara Trembly, has done a series of first-hand reports in which he has documented the difficulty in buying coverage over the Web, as well as the ridiculously wide range of prices quoted online on the same type of policy.

But as time goes on and Internet commerce matures in financial services, insurers will almost certainly get their acts together and establish the Web as a standard shopping option for consumers–one which should expand the market and lower costs while empowering consumers.

This is especially true because the next generation of insurance consumers, raised with a mouse in their hand and completely at home in cyberspace, will undoubtedly demand Internet sales and service from all their vendors–insurers and brokers included. If the current insurance Web sites can’t get the job done, a new breed of Web-peddler will emerge who can meet that burgeoning demand.

But none of this will happen if onerous legislation kills Web sales in the cradle in the misguided quest for privacy protection.

Consumers are entitled to a reasonable set of standards guarding their privacy. However, if the law is too restrictive, it will prevent or make it cost-prohibitive for insurers to collect the information they need to write policies online. That would ultimately be to the detriment of consumers, both in terms of cost and convenience.

There is also a valid concern on the industry’s part that those who do business online will be held to a higher privacy standard than conventional firms, meaning that insurers might have easier access to supporting data if they get an application by fax or snail-mail, rather than via the Net. That reflects the Web paranoia we mentioned earlier rather than common sense on the part of the public.

The heat is on Congress to reassure jittery Web shoppers about the sanctity of their personal data. But Congress should look carefully before it leaps into this controversy, perhaps authorizing a comprehensive study of the privacy fallout before stopping e-commerce in its tracks.

Due to a parliamentary maneuver, a second vote on the bill will be necessary before it can go to the Senate floor. The industry needs to fight until the bitter end on this bill.


Reproduced from National Underwriter Life & Health/Financial Services Edition, May 27 2002. Copyright 2002 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.