Discriminatory Privacy Bill Still Circulating Calif. Legislature

For the past four years, the American Insurance Association (AIA) has been in a fight to avoid “a solution in search of a problem”—a financial privacy measure that has been approved by the California State Judiciary Committee.

The measure, SB1, would allegedly discriminate against companies based on their corporate structure and would create “California-only” rules for financial institutions operating in the state, claims the AIA.

The bill was developed by Calif. State Senator Jackie Speier (D) and a group of privacy advocates that would reportedly create an opt-in system for information sharing among non-affiliated third parties and an opt-out system for information sharing between affiliates.

In a press release from the AIA, Bill Gausewitz, assistant vice president, noted, “This measure would invade the internal operations of a company and would discriminate between companies with different corporate structures. Companies that include separate affiliates . . . would be unfairly held to a stronger privacy standard than a corporate entity that is organized as a wholly-owned company with divisions. Companies that contract for services would be held to an even higher standard.”

“I think that agents will be put in a difficult situation,” Nicole Mahrt, AIA director of public affairs, Western region, added. “It’s going to make it more difficult for companies to market their products, so it’s going to make California a less attractive place to do business.”

The Insurance Information and Privacy Protection Act (IIPPA) currently regulates insurance companies operating in California. The existing law restricts insurers’ information sharing practices and also requires that notices regarding a company’s privacy policy be provided to policyholders. According to Gausewitz, “SB 1 would require insurers, banks and other financial institutions to send a separate and unique California—specific privacy notice to customers. Insurers are already required to send two notices in order to comply with the IIPA and the federal Gramm-Leach-Bliley Act. If the Legislature wants to mandate a privacy notice in California, there is no logical argument against drafting the law to allow consolidation with existing privacy notice requirements.

“Privacy laws are nothing new to California. Since 1999, more than 40 laws have been passed that limit the use of Social Security numbers, create do-not-call lists for telemarketers, create 800-numbers for consumers to avoid direct marketing and requirements for disposal of consumer information,” Gausewitz continued. “The Legislature should evaluate the impact of existing laws before mandating complex new requirements on the financial services industry.”

“It is a poorly drafted bill,” Mahrt added. “If the Legislature wants to pass something that limits information sharing then they need to pass a workable bill.”

SB1 recently passed in the Senate Judiciary Committee and is now on its way to the Senate Appropriations Committee.

Topics California