As the November presidential election draws near, partisans on both sides of the political divide warn of catastrophic consequences if the opposing candidate should win. The impact of either candidate's election - or a switch in the Senate from Republican to Democratic control - on the insurance industry, however, is unclear. The Republicans' favorable attitude toward business interests is likely to help the insurance industry, just as the Democrats' focus on individual rights has the potential to increase burdens on the industry and the technologists who serve it. But, the exact impact on other issues of importance to the industry is less clear.
For example, while President Bush was in line with insurance industry activism on the Terrorism Risk Insurance Act of 2002 (TRIA), the White House has shown far less solidarity with the industry's current efforts to extend the Act past 2005 or replace it with new federal terrorism insurance legislation. How much that matters is uncertain, says Carl Parks, the Washington, D.C.-based senior vice president, federal government relations, of the Property Casualty Insurers Association of America (Des Plaines, Ill.). "We've had a lot of good Democratic support on TRIA as well," he notes.
The President's current position, however, may simply be symptomatic of the reluctance of both parties to act on any number of issues while an election looms. Given that the presidential election is so close and the current situation in the Senate is a 51/49 Republican majority, Parks observes that "The notion that either of those could change does tend to shut down a lot of legislation. The view - particularly on the part of the minority - is that, 'Why would we want to allow something to go through if we could come back and set the agenda in 2005?'"
Once the election is decided, movement on legislative issues is more likely. The direction of that movement for matters of importance to the insurance industry, such as legal reform, is likely to be very different depending on who wins, Parks says. In choosing John Edwards - a former trial lawyer - over Dick Gephardt, "It would appear that Kerry chose the trial bar over labor," Parks opines. "That speaks volumes about what we would probably get out of a Kerry/Edwards Administration with regard to legal reform."
Of more immediate importance for insurance technology investors, a Democratic administration is likely to have a greater focus on privacy, according to Lisa Sotto, an attorney with New York law firm Hunton & Williams. She believes more legislative activity could be expected from a Democratic administration, resulting in a greater need to invest in the management of information. "Financial institutions have had to invest heavily in that regard, and I think we'll see more on that side," Sotto says. "I think we'll also see greater emphasis in compliance requirements on the side of protecting individual privacy and the security of individual customers' data."
That could bode ill for the financial services industry, in the view of Kirk Herath, Nationwide's (Columbus, Ohio; $148 billion assets) chief privacy officer. "My biggest fear is that we go too far imposing unreasonably onerous security requirements that no company could possibly comply with," he says.
Many security breach notification bills - requiring customers to be notified in the event of inappropriate access to their private information - are currently working their way through state legislatures, and the so-called California Hacker Bill (SB 1386) was introduced to Congress by Democratic Senator Dianne Feinstein, Herath relates. Such measures - which Herath expects to be more likely under a Democratic regime - "put companies into a difficult situation, because often you don't know whether someone has access to information or not," he says.
Customer Information Restrictions
A Democratic administration is also likely to act to restrict the use of customer information for marketing purposes, Herath contends. "I think we run the risk of having an opt-in kind of regime, which is where consumer activists have wanted us to go for many years," he says. California is a bellwether on the issue, as it has what Herath calls the most proscriptive privacy statute in the country. "It says customers have to opt in for third-party sharing unless the company has a joint marketing agreement," he relates.
Herath adds that the industry would benefit from uniform information-sharing rules, though Republicans' traditional support for states rights, however, could work against such an outcome. "We have a bizarre legal environment now where it's actually easier for me to share customer information with third parties [than with affiliates], because Gramm-Leach-Bliley governs sharing with third parties and the Fair Credit Reporting Act governs sharing with affiliates," he explains. "As long as I have a joint marketing arrangement, I can freely provide my customer list to a third party, and the customer doesn't have an opportunity to opt out. As a result, Nationwide Mutual is prohibited from sharing customer lists with Nationwide Life that it could share with BankOne."
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio