Calif. Poised to Adopt Financial Privacy Law

NU Online News Service, Aug. 25, 11:43 a.m. EDT?The California Legislature has passed stringent financial privacy legislation that Gov. Gray Davis is expected to sign.

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

"We opposed the bill and wrote to the governor about it, but he'll probably sign it," said Sam Sorich, president of the Sacramento-based Association of California Insurance Companies.

Mr. Sorich noted that insurers got swept into a privacy measure that in fact was aimed at other types of financial institutions. "The allegations made [by consumer groups backing the bill] didn't really apply to insurers," in Mr. Sorich's opinion.

"In California, insurance company privacy practices have been regulated for 20 years. But the practical impact is that [the legislation] will negatively affect our member companies," Mr. Sorich added.

The bill would require financial institutions such as banks and insurance companies to get permission from consumers before sharing personal data with other companies, whether those other companies are 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 don't want their information shared. As respects affiliated companies, GLB allows the financial institution to share customers' personal information.

Under the California bill, there is no sharing among non-affiliated companies unless the consumer opts-in. And consumers would have the option of opting out if they don't want information shared with an affiliate of the financial institution.

"It doesn't make sense to have a California-only set of privacy rules for insurers operating nationwide," Mr. Sorich said. "The law also would hamper insurers' ability to notify customers of other products and services they may need."

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Calif. Poised to Adopt Financial Privacy Law

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