Alliance May Sue New Mexico Over Privacy
By Daniel Hays
NU Online News Service, Jan. 3, 2:32 p.m. EST?A representative of a national insurance trade association today raised the possibility of a lawsuit or other action to overturn New Mexico's recently adopted privacy regulations, which it contends are illegal.
Although the group hasn't decided yet, Rey Becker, vice president of property-casualty for the Alliance of American Insurers, based in Downers Grove, Ill., said an appeal through regulatory channels or in court is "a distinct possibility."
Last year the New Mexico Legislature directed the superintendent of insurance to adopt rules governing the privacy of "nonpublic personal information of insured persons."
Mr. Becker said the New Mexico law authorizes rules governing "only applicants for policies and actual policyholders–in other words, the folks that have a business relationship with the insurer and pay the premiums."
"Unfortunately," he continued, "the superintendent ignored the clear wording of the law and unilaterally broadened the rules to cover third-party liability claimants and workers' compensation claimants, who are clearly not insured persons. In the case of workers' compensation claimants, this also violates the clear scope of the federal Gramm-Leach-Bliley Act, which applies only to goods or services for 'personal, family or household purposes,' not workers' compensation insurance policies."
Mr. Becker said while the intent of GLB was to lower impediments to commerce, the New Mexico action would foster them and would result in less insurance availability in New Mexico.
"Most troublesome of all," he said, "is the creation of a new 'opt-in' system, which will create additional costly barriers for insurers wishing to write business in New Mexico, and place them at a disadvantage compared to banks and securities firms, which remain subject to the more cost-effective 'opt-out' approach."
Under the opt-out system, an insurer may disclose information once a consumer does not respond to an inquiry regarding release of information. With opt- in, the insurer cannot disclose information to other parties unless the consumer specifically grants permission.
"So far, only New Mexico and Vermont have made the decision to force their insurance consumers to live in a financial services backwater, compared to the rest of the country," Mr. Becker said.
The Alliance of American Insurers represents 326 property-casualty insurance companies nationwide.
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