Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Judiciary, to which was referred S.B. No. 1550, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to enact a new insurance article governing the treatment of nonpublic personal financial information about individuals by all health insurance companies, mutual benefit societies, and health maintenance organizations (licensees).

Your Committee received testimony in support of this measure from the Insurance Division, Mutual Benefit Association of Hawaii, Royal State National Insurance Co., Ltd., Voluntary Employees' Benefit Association of Hawaii, State Farm Insurance Company, American Family Life Assurance Company of Columbus, American Council of Life Insurers, National Association of Insurance and Financial Advisors Hawaii, Health Insurance Association of America, and Hawaii Insurers Council. Testimony in opposition was received from the Office of Information Practices, Hawaii Medical Service Association, and Kaiser Permanente.

This measure requires licensees to provide a clear and conspicuous notice that accurately reflects its privacy policies and practices to a customer before the licensee discloses any nonpublic personal financial information about the customer to any nonaffiliated third party, unless authorized by this measure. Nonpublic personal financial information is personally identifiable financial information, as well as any list, description, or other grouping of consumers and publicly available information pertaining to them that is derived using any personally identifiable financial information that is not publicly available. Personally identifiable financial information is any information that is (1) provided by a consumer to a licensee to obtain insurance, (2) about a consumer resulting from a transaction involving insurance, or (3) obtained by a licensee in connection with providing a service to that consumer.

This measure, among other things, also:

According to testimony of the Insurance Commissioner, this measure tracks with the federal Gramm Leach Biley Act (GLB) and the federal regulations issued by federal banking agencies that protect personal financial information provided by consumers to insurers in the normal course of business. The GLB was enacted by Congress in 1999 and included a limitation on the ability of financial institutions to disclose "nonpublic personal information" about consumers to nonaffiliated third parties, in the interests of protecting privacy. By enacting this measure, the State would avoid possible preemption by federal law relating to the Federal Deposit Insurance Act and preserve its ability to regulate bank sales of insurance.

Your Committee notes the observation of the Committee on Consumer Protection and Housing in Senate Standing Committee Report No. 314, "With these comments, your Committee urges caution and patience in the passage of this measure, with a view that more work will probably be needed by the Insurance Division, health insurers, and financial institutions to come to a consensus on the language of this measure before possible passage this legislative session." Your Committee requests that discussions continue among all testifiers on this measure, in the interests of enacting a law that is not beset with the same problems as Act 87, Session Laws of Hawaii 1999, relating to the privacy of health care information. For this purpose, your Committee has retained the effective date of July 1, 2050.

Your Committee has amended this measure by inserting a definition of "producer" on the recommendation of the Insurance Commissioner, and making technical, nonsubstantive amendments for clarity.

As affirmed by the record of votes of the members of your Committee on Judiciary that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1550, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 1550, S.D. 2.