Insurers call on Vermont to track NAIC model on privacy

The American Insurance Association, which represents major property and casualty insurers, stressed the need for consistency among states in financial services privacy regulation at a Financial Privacy Conference sponsored by the Vermont Attorney General and the Department of Banking, Insurance, Securities and Health Care Administration.

AIA said it supports the NAIC model privacy regulation as the best way to provide uniformity among states and with federal regulations implementing the Gramm-Leach-Bliley Act (GLBA). AIA is opposing a regulation proposed by the Vermont Department that deviates significantly from the NAIC model.

"AIA supports state efforts to protect consumer financial and health information pursuant to Title V of GLBA while preserving critical business use of such information. It is essential that state regulatory efforts in this area be uniform in order to avoid the disparate treatment and confusion among consumers and the regulated community that will inevitably result should different states adopt differing regulatory standards," said Donald Baldini, AIA assistant vice president, northeast region.

The proposed Vermont regulation differs significantly from the NAIC model in the restrictions it places on the sharing of financial information among affiliates and with third parties.

In a letter sent by email last month to Jacqueline Hughes, Vermont Department General Counsel, AIA cited three key areas of concern:

• "General treatment of nonpublic personal financial information disclosures to non-affiliated third parties: The Department's proposed rules generally subject such disclosures to an ‘opt-in' authorization requirement while the NAIC model regulation proceeds from an ‘opt-out' consent standard.
  
• "Treatment of nonpublic personal financial information disclosures to non-affiliated third parties under ‘joint marketing'/service provider exception: The Department's proposed regulations change the consent standard from ‘opt-in' to ‘opt-out,' while the NAIC model regulation eliminates the consent requirement altogether where the disclosure falls within the joint marketing/service provider provision. Further departing from the NAIC model regulation, the Department's proposed regulations asserts a "joint agreement" definition that potentially limits the types of information that may be disclosed under a joint marketing arrangement.
  
• "Exclusion of ‘joint marketing' exception: The proposed regulations bracket the joint marketing sections of the proposed rules based on the Department's continuing questions over its authority to include such an exception. The NAIC model regulation unambiguously includes a joint marketing exception in order to preserve the balance achieved in Title V of GLBA."

Baldini said that imposing standards different from the NAIC model regulation in critical areas "would discourage insurers from fully developing and marketing innovative products and services in Vermont." This would deprive Vermont consumers of the full range of choices available to insurance consumers in other insurance regulatory jurisdictions, he said.

"AIA supports laws and regulations protecting the legitimate privacy rights of insurance customers," Baldini said. "To be manageable, however, the laws and regulations must balance individual privacy concerns with an insurer's need for information for its business operations, including the marketing of financial products and services. Perhaps most importantly, the laws and regulations must be consistent."

With contribution from Dave Willis
Managing Editor, Property and Casualty
Source: American Insurance Association