In a previous article we traced some important landmarks in the development of insurance in America from the 18th to the mid-twentieth century. Cases like Paul vs. Virginia and the South-Eastern Underwriters Association helped to shape our regulatory climate through the end of the twentieth century.
One of the biggest regulatory changes affecting insurance companies began in late 1999 when Congress introduced the Gramm-Leach-Bliley Financial Services Modernization Act. The Act removed distinctions between insurance companies, banks, and investment services that had been in place since the Great Depression and reaffirmed by the Bank Holding Company Act and its amendments that forbid banks from conducting general insurance underwriting or agency activities. Gramm-Leach-Bliley repealed sections of these earlier acts and allowed banks to engage in a wide range of financial services.
The law was responsive to marketplace and technological developments that had begun to blur the roles of different financial service providers and its goal was to allow the financial services market to offer services more efficiently and at less cost. Recognizing that the new financial institutions resulting from these changes would have access to an incredible amount of personal information, the law provided for restrictions on data use. Gramm-Leach-Bliley included requirements to protect the personal data of individuals: First, banks, brokerage companies, and insurance companies were required to store personal financial information securely. Additionally, they were required to advise consumer of their policies on sharing of personal financial information. Finally, they were required to give consumers the option to opt-out of some sharing of personal financial information. Citigroup was only one of the financial conglomerates that resulted from the Act.
The insurance industry continues to be affected by newer laws and by it’s evolving role in the marketplace. The marketplace changes how insurers operate since banks, brokers and non-insurance financial entities are playing a larger role in providing protection against certain types of loss.
In the past few years, legislation like Sarbanes-Oxley intended to protect shareholders and the general public from accounting errors and fraudulent practices and the Patriot Act with roots in concern with terrorism have had an impact on the insurance industry. Insurers are still regulated largely by the states, but similar to the financial services industry, they have an increasing obligation to comply with federal regulations involving gathering and use of financial data, reporting financial transactions, adhering to customer rights to privacy. Our Washington insurance agencies remain responsive to the Washington Insurance Commissioner’s Office, and we are also responsive to federal requirements that help insure our customers safety and privacy.