Privacy Is Still A Hot Topic For Agents

The topic might not be as much of a concern at the moment asfinding coverage for clients in the hard market, but privacy issuesfor property-casualty producers have not gone away, agent andbroker groups warn.

Around this time last year, as the deadline for privacynotification under the federal Gramm-Leach-Bliley Act approached,agents were trying to figure out whether they had to send outprivacy notices to their clients by July 1.

The date passed with apparently little debate over whether therewas compliance. Agents practicing in states where privacy laws werenot in place relied upon the language of GLB to meet thecriterion.

Since then, all but one state has adopted privacy standards thatmeet the requirements of GLB, according to the National Associationof Insurance Commissioners. In that one state–Alaska–lawmakers andthe state insurance regulator are still working on developingprivacy legislation, the NAIC said.

However, as closely as the states have worked to create privacylegislation that meets GLB's standards, variety still abounds.Agent and broker association representatives caution that producersneed to be familiar with their individual state's privacyrequirements to avoid violating the law.

To protect themselves, producers should mail out privacynotifications each year, advised representatives at the IndependentInsurance Agents & Brokers of America and the NationalAssociation of Professional Insurance Agents, both based inAlexandria, Va. The notices advise customers of the collection ofpersonal information and how it would be used in the course of anyinsurance transaction.

“The simple way for agents to protect themselves is todistribute privacy notices,” advised Marianne Caulfield,association general counsel for IIABA.

Generally, the customary use of personal data for the purposesof the underwriting, renewal and maintenance of an insuranceaccount is an accepted reason for sharing information, according toPatricia A. Borowski, senior vice president of PIA.

While insurance carriers and other financial institutions areobligated to meet the privacy demands of both federal and stateregulators, an agent's concern is to meet the obligations of thestate law. “If a carriers' privacy regulations are more complicatedthan the [agent's] business, then the company's rules should not beimposed,” Ms. Borowski said. “We tell our agents that they do nothave to comply with all of GLB, only with their state insuranceregulations.”

One area in which the privacy issue is coming under new scrutinyis health information. The new battleground is over the U.S.Department of Health and Human Services' development of proposedprivacy rules pursuant to the Health Insurance Portability andAccountability Act, noted association representatives.

According to the HHS Web site, the act, which was signed intolaw in 1996, “is aimed at limiting exclusions for pre-existingmedical conditions, prohibiting discrimination against employeesand dependents based on their health status, guaranteeingavailability of health insurance to small employers, andguaranteeing renewability of insurance to all employers regardlessof size.”

The concern, noted Nicole Allen, director of government affairsfor the Council of Insurance Agents and Brokers in Washington, ishow the privacy provisions under HIPAA would affect producers'ability to shop around health programs for their clients. Thiswould be of concern to p-c agents involved in employee benefitplans.

Essentially, the fear is that, should the final regulation barthe transmittal of personal data for underwritingpurposes–essentially claims information–underwriters would not beable to price the plan, Ms. Allen pointed out.

The proposed regulations would curtail the “free flow” ofinformation that producers need to shop a plan around or to addbenefits for employees, she said. Unlike HHS, state regulators didunderstand the importance of this and permitted the exception, Ms.Allen noted.

She said the latest revisions, published in March, if notfurther revised, would make it “impossible to do business in themarketplace.”

Agent associations have expressed their concerns. Ms. Allen saidmembers of CIAB have met with HHS representatives to lay out theirconcerns. HHS is expected to come out with its next ruling in thefall, she said.

According to HHS, most “covered entities” would have until April14, 2003, to comply with the department's privacy regulations, and“certain small health plans” would have until April 14, 2004, tocomply. (For more on the health data privacy issue, see StevenBrostoff's story on page 15.)

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.