As consumer and labor activists demonstrate against the World Trade Organization in Seattle this week, global professional advisory firm, KPMG, New York, released its latest survey of insurance executives on the nation’s new consumer privacy rules as required by passage of the Gramm-Leach-Bliley legislation (formerly known as the Financial Reform Modernization Act).
The Gramm-Leach-Bliley requirements, which President Clinton signed Nov. 12, have a short, one-year effective date. There is indication that many direct marketers of insurance products have their work cut out for them in terms of fully understanding how they’re supposed to begin managing their customers’ personal information by the fourth quarter of 2000.
According to JoAnn Barefoot, a partner with KPMG's Financial Services Consulting division, participants expressed concern regarding compliance issues, a worry spurred in part by the year’s string of privacy-related lawsuits against banking institutions which can now offer insurance products. But perhaps more importantly, she notes that insurance leaders have less time to prepare for the wave of new policy guidelines.
“Since the insurance industry has not been using consumer information as intensely as other industries, it is not as prepared to handle the changes in the privacy laws.” She says many companies are facing a “real scramble to comply in time with the new legislation.”
The most astonishing finding within results, was the revelation that nearly a third of the insurance executives polled have no idea who is in charge of their company’s privacy implementation policy.
“That’s an interesting number” says Barefoot, “and it does represent a problem for the industry but not one that surprises me because privacy is something that is moving faster than any other consumer issue I’ve seen in my 30 years of working in financial services. The reason is technology. Everything is moving very quickly and we really have just a few laws that directly govern privacy.”
Ironically though, litigation is one of the primary risks facing the industry yet certainly one that executives fear.
Barefoot says the insurance industry has one year to comply with the new rules which require that companies begin giving their customers the opportunity to “opt-out” of having their personal information revealed to a third party without their permission. Barefoot concedes this complicated challenges between divisions of company but she hints the alternative may be even more costly for those who don’t heed the warning.
“These businesses now have to begin controlling the way their customers’ information leaves the company.”
