Stringent data reforms passed by European Parliament
The European Parliament last week (12 March) voted in favour of tough data protection reforms that could have wide-reaching consequences for the insurance industry.
The regulations would tighten up laws on data transference to non-EU countries, meaning that any firm would be required to seek the prior authorisation of a national data protection authority in the EU before disclosing any EU citizen's personal data to a third country.
The firm would also have to inform the person concerned.
The vote has triggered concerns that the proposed legislation could interfere with risk management.
The new law is also expected to lead to significantly greater demand for data breach insurance.
However, William Long, a partner at law firm Sidley Austin, also said increased controls on personal data could have an impact on the industry's ability to profile clients and calculate risk, as well as creating potential problems for reinsurers not in direct contact with clients.
Long added that insurers would need to spend time putting procedures in place to comply with the legislation, due to the significant amount of sensitive data they hold. Regulating the provision of personal data to other companies, including fraud prevention agencies, could also be an issue.
"If insurers can't provide the data, there is an increased risk of fraudulent claims," said Long.
The extensive proposals include a "right to be forgotten" that would give policyholders the option to have their data deleted once it is no longer needed by a firm.
They could withdraw consent for personal data to be used, unless that data is required by EU law or for scientific research.
The European Parliament also voted to increase fines for companies that abuse customers' data from 2 percent of global turnover to the higher of 5 percent of turnover, or EUR100mn.
The proposed legislation still needs to pass through the European Council before it becomes law, with the European Parliament aiming to reach an agreement before the end of 2014.