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Committee advances insurance data-privacy bill after hours of testimony and industry opposition
Summary
SB 354 would update insurance-sector privacy rules, give consumers opt-in rights for non-insurance uses, correction and deletion rights, and move enforcement or regulatory oversight toward the Department of Insurance; the committee advanced the bill 5-2 after significant stakeholder debate.
Senator Limon introduced SB 354 to modernize consumer privacy protections in the insurance market and the Senate Insurance Committee voted 5-2 to pass the bill to the Judiciary Committee after extended testimony from the Department of Insurance, consumer groups and multiple insurance industry associations.
"Protecting consumer privacy is only becoming more important in a digital world," Senator Limon said, describing the measure as updating insurance privacy law that dates from the 1980s. The bill would give consumers an opt-in right to sharing personal information for purposes unrelated to the insurance transaction, rights to correct inaccurate information, access to categories of information collected and the sources of that information, and the ability to receive reasons for adverse underwriting decisions and delete inaccurate or unnecessary data.
Insurance Commissioner Ricardo Lara described SB 354 as a "landmark bill" and urged support, saying insurers must be accountable for modern data uses and the bill would help prevent consumers from becoming victims of fraud if personal data are compromised. Damon Diederich, privacy officer at the Department of Insurance, told the committee the bill uses an "opt-in" standard for sharing information for purposes other than the insurance transaction and that "insurance transaction" is defined in the bill to include application through claim handling, including fraud detection.
Consumer advocates expressed support or cautious optimism. Robert Harrell of the Consumer Federation of California said his organization was "encouraged by where this is going" but raised concerns about appointment authority and other technical elements.
Multiple industry groups testified in opposition or in an "opposed unless amended" posture, including the Association of California Life and Health Insurance Companies, the Personal Insurance Federation of California, the American Property Casualty Insurance Association, and several trade and business groups. Opponents argued the bill moves beyond existing state privacy standards in ways that could disrupt underwriting and increase costs and urged more time to coordinate with the California Privacy Protection Agency (CPPA) rulemaking and the National Association of Insurance Commissioners' national privacy model work.
Committee members raised procedural and substantive concerns during the hearing: Senator Nilo said the bill contains substantial detail and risk of unintended consequences and suggested the NAIC work should inform California's approach; Senator Wahab expressed concerns about data security and litigation risk; Senator Becker and others noted the need to balance consumer protections with operational realities and marketing benefits for consumers.
The committee voted to pass SB 354 to the Judiciary Committee, with Senators Rubio, Becker, Caballero, Padilla and Wahab recorded as voting "aye," and Senators Nilo and Jones recorded as voting "no." The tally recorded in the hearing was 5-2.
Senator Limon and Department of Insurance representatives committed to continued stakeholder engagement and follow-up discussions before the bill proceeds further in the legislative process.
