By

Washington

Insurance agents and companies are fighting privacy battles on a number of fronts, opposing legislation they believe unnecessarily inhibits legitimate commerce.

The primary bills are moving through the Senate, and cover such topics as the use of Social Security numbers, commercial e-mail and online privacy.

In each instance, the insurance industry complains that the legislation, while well intended, imposes unfair costs and burdens on financial service providers.

Looking first at Social Security numbers, the Senate Judiciary Committee recently approved S. 848, legislation introduced by Sen. Dianne Feinstein, D-Calif., that would prohibit the sale or display of Social Security numbers to the public.

The legislation is aimed at fighting the growing problem of identity theft, which Feinstein says increased by 500% from 1998 to 2001.

“By reducing public access to Social Security numbers, this legislation will help reduce the number of identity theft crimes,” Feinstein says.

The legislation would prohibit the sale or display of a Social Security number without the individuals consent, except for certain business-to-business or business-to-government transactions.

In addition, it would give consumers the right to refuse to give out their Social Security numbers to companies and to enforce their rights with a private right of action.

“This legislation strikes a balance between the need for legitimate business uses of the Social Security number and the need to prevent identity theft,” Feinstein says.

But Jim Pitts, executive director of the Washington-based Financial Services Coordinating Council, says S. 848 would impose unnecessary costs and burdens on financial institutions without providing additional protection to consumers.

He says that the Gramm-Leach-Bliley Act already places significant restrictions on the use of Social Security numbers.

“No further regulation of the industry is needed,” he says.

Moreover, Pitts says, S. 848 is self-defeating.

Social Security numbers, he says, provide the best identifier that financial institutions can use to determine whether a person is who he says he is.

“Without access to this unique identifier, crimes like identity theft, fraud and money laundering would be more rampant,” Pitts says.

FSCC members include the American Insurance Association, the American Council of Life Insurers, the American Bankers Association and the Securities Industry Association, all of Washington.

S. 848 will next be considered by the Senate Finance Committee.

On commercial e-mail, or spamming, the Senate Commerce Committee recently approved unanimously S. 630, legislation sponsored by Sens. Conrad Burns, R-Mont., and Ron Wyden, D-Ore., that would require e-marketers to allow recipients of commercial e-mails to opt out of receiving any further communications.

It would subject e-marketers who intentionally disguise their identities to criminal penalties. In addition, those who violate the act could be fined up to $1.5 million.

Burns says spamming causes consumers to waste both time and money.

“On this issue, either you are for the consumer or against the consumer,” he says. “There is no middle ground.”

David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va., says however that S. 630 unduly burdens and restricts legitimate commercial e-mails.

He notes, for example, that the opt-out provision requires all business to provide an opt-out notice to all customers dating back three years.

This requirement, Winston says, would force all NAIFA members to retroactively review their entire database and retrieve information necessary to comply with the requirement.

Moreover, he says, the legislation imposes strict liability on e-marketers. This means that businesses can be held liable for inadvertent violations. In the Internet environment, Winston says, this could give rise to enormous cumulative liability exposure, even if there is no showing of actual harm.

Finally, the Senate Commerce Committee approved and sent to the floor of the Senate S. 2201, legislation that would bar commercial Web site operators from collecting or disclosing personally identifiable information of a user without clear and conspicuous notice, including notice of their right to opt-out.

The legislation would allow private lawsuits against those who violate the act.

S. 2201 was approved by the Committee by a 15-8 vote, but a parliamentary maneuver delayed its movement to the floor of the Senate. That maneuver was overcome recently and the bill was sent to the floor.

Pitts says S. 2201 would create a flood of new and frivolous litigation and result in increase costs to consumers.

Moreover, he says, it would have a disproportionate impact on financial services firms because it does not include exceptions for normal business practices that are at the core of providing financial services.

In tax news, the Senate Finance Committee is expected to hold hearings on executive compensation issues before the end of June.

These hearings are likely to include an examination of corporate-owned life insurance and split-dollar.


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.