Comments on H.R. 2161

Legislation has been proposed to improve information practices in the insurance industry and to amend the Privacy Act of 1974. GAO believes that the portion of the bill requiring that an individual subject to an adverse underwriting decision be informed by insurers of the fact and of his rights under the law is consistent with its assessment that consumers should be informed of the reasons behind adverse underwriting decisions. The section of the bill requiring that individuals be informed when an agent submits their application to the residual market or a substandard insurer may need to be clarified. GAO suggests that it be changed to apply to all situations where agents make application to the residual market or substandard companies and that it be broadened to require agents to supply information about the residual market mechanism together with notice of the adverse underwriting decision. GAO believes that compliance with the requirements in the legislation would not incur costs which are significant in relation to the general administrative and claims costs of insurers. The intended effect of the immunity provision on the penalty provisions of the bill should be clarified. The bill contains no provisions for assessing the effectiveness of its procedures and monitoring its implementation. This responsibility could be placed within the Department of the Treasury in which the bill places other responsibilities. Another alternative would be to place the responsibility within the Office of Management and Budget which is responsible for overseeing the Privacy Act of 1974.