NAIC: Working Group Adopts Privacy Notice Report

The report was drafted by the Kansas City, Mo.-based association's Privacy Notice Subgroup, along with consumer and industry representatives. It was released at the association's conference held this week in Atlanta.

"The report will assist insurers in their efforts to improve the readability and understandability of privacy notices, allowing consumers to make smart decisions regarding their personal information," commented Gregory V. Serio, New York's insurance superintendent and co-chair of the Privacy Issues Working Group.

Since July 1, 2001, financial institutions, including licensees, have been providing their customers with privacy notices as required by the Gramm-Leach-Bliley Act and state laws. Currently, they are required to provide notices annually to customers and to certain other consumers as well.

The notices from insurers are intended to educate consumers as to how their information is being disclosed. They are also designed to help consumers in making informed decisions about how to exercise their legal and contractual rights with regard to their personal information, such as limiting certain disclosures. It is also designed to help in comparing licensees' information disclosure practices when shopping for insurance and other financial services.

However, consumers have complained that the notices are confusing, complicated and overly legalistic, which is not to say that the notices are not in compliance with the Gramm-Leach-Bliley Act and applicable regulations, according to the group.

The reason for hard-to-understand notices, the group reported, is not that insurers aren't putting enough effort into writing the notices or trying to give customers a hard time, but devising simple, consumer-friendly privacy notices while complying with specific legal requirements is very difficult.

The adopted report includes sample notice provisions for insurers to use. It includes introductory language explaining the meaning and purpose of the notice, and suggestions for writing the notice such as customer-friendly formatting to simplify, shorten and make the notices easier to understand.

The suggestions made in the report, however, are not mandatory or even "best practices," according to the Working Group. The suggestions are recommendations that regulators would like insurance companies to use as a guide for improving their current notices.

The February version of the report, with small revisions, including suggestions to expand the type size, can be found at //www.naic.org/1privacy/2-11-03_Report_for_Dist.pdf.