The Data Protection Act and its impact on the insurance industry

Abstract

Over the years, processing of personal data has been facilitated by the extensive increase in the powers of information processing systems. For this reason most European countries, and also recently Malta, have enacted data protection legislation designed to balance the individual's right to privacy with the need of organisations, commercial or otherwise, to process data. Data protection law imposes obligations on those who process personal data and provides individuals with certain rights to ensure that the data are not misused. Financial institutions are vitally affected by the use of computers and data processing equipment. The insurance industry is probably more affected by data protection legislation than any other industry, due to the substantial volumes of information, personal or sensitive, processed everyday. Insurance business, whether long term or general, requires the collection and use of considerable data. The disclosure of personal data, which could include criminal data or medical data, is essential to provide insurance cover since an insurer will assess the risk on the basis of the information obtained by the proposer. This study attempts to illustrate the substantial impact that data protection legislation will have on the provision of insurance services, since computerised insurance data as well as certain categories of manual data are to be processed in terms of the Data Protection Act. It also places significant emphasis on the definitions contained in the Act, the obligations imposed by data protection legislation and the rights granted by data protection law, since they are essential to assess the impact of the legislation. Reference is also made to current insurance practices, such as the inevitable exchange of information that takes place within the insurance industry in order to combat :fraud. Various sections found within the Data Protection Act are identified throughout the thesis as having a substantial impact on the insurance industry.