Insurance trade says FTC order threatens consumer security

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Updated Monday, Dec. 29 at 8:47 p.m. EST

A new Federal Trade Commission (FTC) order requiring nine insurance companies to provide data relating to how they set premiums could place policyholders' personal information at risk, a leading insurance trade group said this week.

Under the Fair and Accurate Credit Transactions Act of 2003, the FTC is required to study the use of credit-based insurance scores -- similar to a credit rating -- and how they impact the availability and cost of homeowners' insurance. The scores let the insurance companies charge higher premiums to those deemed high risk, a 2007 FTC showed.

But the order drew flak Tuesday from the American Insurance Association (AIA), which contends that insurance companies now will be required to "provide a wide array of consumers' personal information" -- some of which they don't even collect -- thus raising privacy and security concerns.

"We are disappointed the FTC chose this route, despite the industry's good-faith efforts to work cooperatively to find a sensible, secure and cost-effective alternative to provide the data the FTC says it needs to conducts its study," said David Snyder, AIA vice president and assistant general counsel, in a statement. "The use of a 'compulsory process' does not allay our serious concerns about the handling and protection of massive amounts of consumer data."

Snyder said the insurance companies will be asked to turn over information, such as consumers' Social Security numbers and mortgage details, and are unsure what measures the FTC is taking to protect the data.

Evan Zullow, a staff attorney with the FTC, told on Monday that the agency is sensitive to privacy issues.

"We are attempting to set up procedures so that if individual firms would like, they can limit what directly is coming to us," he said. "We have a long history of dealing with very sensitive information and believe we have strong procedures in place to protect it."

Affected insurance firms include State Farm, Nationwide, Allstate and Liberty Mutual.

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