GDPR Compliance for the Insurance Industry

The implementation date of the General Data Protection Regulation (GDPR) was 25 May 2018 this includes GDPR for the Insurance Industry. This type of in-depth review is important, as failure to comply with GDPR rules could lead to the imposition of significant fines and other sanctions.

One important factor to note is that the GDPR may apply to insurance companies across the globe; not just those that are based in European Union (EU) member states. If your company is based in the European Union or processes the personal data of data subjects in the EU, as part of its operations, then it needs to comply with the GDPR. All of this means that you need to ensure all your preparations are complete, before the GDPR becomes a reality.

The territorial scope of the GDPR is vast and the insurance sector also often provides global coverage

The GDPR does not refer to citizens or EU citizens , indeed, the language that is used most consistently throughout the GDPR is “natural person” or ‘’data subject’’ and. ‘personal data’ means any information relating to an identified or identifiable natural person (‘data subject’)

This is because the GDPR stipulations apply when personal data is processed of a data subject who is in an EU country at the time the data is processed. Therefore, an American passing through a Duty-Free shop in Europe would have GDPR apply to his or her data processed during that transaction,

This is not the full extension of GDPR

The Article 3 (1) expands the definition of the Data Subject even wider to potentially include almost anyone in the world by the application of GDPR to EU Data Controllers and Data Processors and their operations even where processing takes place outside the union.

Article 3 (1) states: “This Regulation applies to the processing of personal data in the context of the activities of an establishment of a controller or a processor in the Union, regardless of whether the processing takes place in the Union or not.”

Therefore, by a Controller or Processor based in the EU who processes data of data subjects located anywhere in the world example a Chinese data subject living in China, and whose data is being processed by an EU established Data Controller or processor can also expect GDPR to apply.

A “Controller” under GDPR is the organisation or company which determines the purposes of the processing of personal data where a “processor” carries out the processing of the personal data on behalf of the “Controller”. A “processor” can further engage “sub-processors” and the “Controller” would have visibility and approval rights over these “sub-processors”.

Legal Basis

In order to process personal data in compliance with GDPR a legal basis is mandatory. For personal data (data that is not special category personal data) there are 6 Legal Bases for processing personal data under the GDPR. Article 6 of the GDPR lists those legal bases which are (1) Consent of the data subject, (2) processing is necessary for the performance of a contract, (3) processing is in compliance with a legal obligation, (4) processing is necessary for protection of the vital interests of the data subject or other natural person, (5) processing of personal data is being carried out in the public interest and (6) and processing is carried out for the legitimate interest of the controller or by a third party.

The GDPR in Article 9 has additional requirements for Special categories of personal data. Special Categories of personal data are “Processing of personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, or trade union membership, and the processing of genetic data, biometric data for the purpose of uniquely identifying a natural person, data concerning health or data concerning a natural person’s sex life or sexual orientation.

These Special Categories of personal data have extra safeguards around their processing also detailed in Article 9. For supporting of special category personal data consent now becomes explicit consent (a signed form for example). The legal bases for processing Special Category personal data are as listed in Article 9

  1. the data subject has given explicit consent to the processing of those personal data for one or more specified purposes
  2. processing is necessary for the purposes of carrying out the obligations and exercising specific rights of the controller or of the data subject in the field of employment and social security and social protection law in so far as it is authorised by Union or Member State law or a collective agreement pursuant to Member State law providing for appropriate safeguards for the fundamental rights and the interests of the data subject;
  3. processing is necessary to protect the vital interests of the data subject or of another natural person where the data subject is physically or legally incapable of giving consent;
  4. processing is carried out in the course of its legitimate activities with appropriate safeguards by a foundation, association or any other not-for-profit body with a political, philosophical, religious or trade union aim and on condition that the processing relates solely to the members or to former members of the body or to persons who have regular contact with it in connection with its purposes and that the personal data are not disclosed outside that body without the consent of the data subjects;
  5. processing relates to personal data which are manifestly made public by the data subject;
  6. processing is necessary for the establishment, exercise or defence of legal claims or whenever courts are acting in their judicial capacity;
  7. processing is necessary for reasons of substantial public interest, on the basis of Union or Member State law which shall be proportionate to the aim pursued, respect the essence of the right to data protection and provide for suitable and specific measures to safeguard the fundamental rights and the interests of the data subject;
  8. processing is necessary for the purposes of preventive or occupational medicine, for the assessment of the working capacity of the employee, medical diagnosis, the provision of health or social care or treatment or the management of health or social care systems and services on the basis of Union or Member State law or pursuant to contract with a health professional and subject to the conditions and safeguards referred to in paragraph 3 of Article 9;
  9. processing is necessary for reasons of public interest in the area of public health, such as protecting against serious cross-border threats to health or ensuring high standards of quality and safety of health care and of medicinal products or medical devices, on the basis of Union or Member State law which provides for suitable and specific measures to safeguard the rights and freedoms of the data subject, in particular professional secrecy;
  10. processing is necessary for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes in accordance with Article 89(1) based on Union or Member State law which shall be proportionate to the aim pursued, respect the essence of the right to data protection and provide for suitable and specific measures to safeguard the fundamental rights and the interests of the data subject.

Both personal data and special category data can be applicable in the insurance industry, therefore different legal bases may apply in the insurance industry for different purposes. When Processing employee data as an employer the insurance company may use contract as a legal basis, when investigating fraud related to insurance claims they may be complying with a legal obligation. When processing a legal claim they may need the explicit consent (perhaps signed consent) of the data subject around medical claims.

Where consent is the legal basis it will be mandatory for consent to be freely given, specific, informed and unambiguous for the non-sensitive personal data and explicit consent will continue to be required for the processing of sensitive data. Silence, pre-ticked boxes or inactivity will no longer be considered valid consent. The validity of consent will expire once the consent is withdrawn or the purpose for which it was sought ceases.

Its key for the insurance company to understand and document which legal basis is applicable in each data processing operation.

New obligations for data Controllers

One of the key changes, when it comes to GDPR is that the responsibility for ensuring that rules are complied with is now shared between data controllers and data processors. Previously, the onus was on data controllers around the processing of the personal data they controlled. The onus is still on the Controller to enter into contracts however both Data Controllers and Data Processors can be on the hook for failing to comply with GDPR. It is imperative that data controllers have contracts, or data processing agreements, with their data processors, indeed the data processor must only process personal data based on the written instructions of the Controller.

Given that most insurance providers are data controllers, which rely on third party processing, it’s critical that any contracts between insurance companies and their data processors are updated to reflect the responsibilities and liability each entity has around data processing and GDPR compliance.

GDPR and the insurance industry – profiling

Another area where GDPR is likely to influence the insurance industry, once it comes into force, is profiling. The use of profiling is prevalent in the insurance industry, in order to undertake actions such as setting premiums, detecting potential fraud and creating direct marketing campaigns.

Under GDPR, a new definition of profiling is created. This definition refers to profiling as being any automated decision-making process, especially the analysis and prediction of performance at work, economic situation, health, personal preferences or interests, reliability or behaviour, location or movements. As you can see, this covers most an aspect for which profiling is applied in the insurance industry.

There is a new right to object, introduced under Article 22 of the GDPR, which states that one can opt out of profiling and automated processing. Under GDPR no data subject should be subject to a fully automated decision except when such a decision is necessary as part of a contract between the data subject and the data controller, the decision is required by law, or explicit consent has been provided by the data subject.

It’s worth noting that this right only applies when the entire decision is made using an automated process, and there is no human intervention involved.Under the GDPR, a data subject has a right not to be subject to a decision based solely on profiling where that decision produces legal effects or similarly significant effects, therefore the data subject can object to such processing.

Lead Authority Mechanism

The GDPR brings the concept of a lead authority mechanism where an organisation operates in more than one member state, the lead authority mechanism means the insurance company can be principally regulated by the Data Protection Authority in the Member State where they have their “main establishment”. This eases the burden on insurance companies as insurance companies and intermediaries will generally only have to deal with one supervisory authority as their lead.

Preparing for GDPR within the insurance industry

GDPR and the insurance industry is a major topic, as this article aims to detail. Any company within the sector needs to be prepared, or it could face being hit with substantial fines for non-compliance. These fines could be as high as 20 million euro, or 4% of annual turnover, whichever is higher. Realistically, it’s unlikely that massive fines will be the norm. But, this does not mean the company can risk being unprepared, apart from fines regulators can rule that data processing be suspended or must cease. There are several preparations that the company needs to make in order to ensure that the company complies with the GDPR once it’s introduced.

  • Ensure that contracts with data processing providers reflect the respective GDPR responsibilities.
  • Audit any personal data that the company processes to ensure that it’s accurate, up to date and that the company still has a legal basis to retain it. Complete a data inventory and ensure that your data inventory is compliant with the GDPR Article 30 requirement.
  • Ensure the company has a fit for purpose retention policy and that the company is respecting it and that it respects the statutory law on insurance industry data retention.
  • Ensure that the company has the appropriate Technical and Organisational measures in place to keep personal data safe and secure.
  • Ensure the company is set up and trained as an organisation to deal with any data subject access requests or other requests from data subjects around their personal data. The GDPR introduces new rights around data portability and data erasure. Personal data erasure is not an absolute right should the insurance company have a legal requirement to retain the data it would be retained. The new data portability right means that the insurance company may have to transfer a client’s data in a machine readable format to a rival company.
  • Ensure the company is set up and trained to deal with any data breaches and reporting of such to the data protection authorities.
  • General training and awareness around data protection is critical for organisations as incorrect data disclosure is the greatest reason for data protection breaches.
  • Ensure that the company’s privacy policy is updated and communicated to data subjects.
  • Ensure the company is legally entitled to process personal data, that it has an applicable legal basis be that contract, legal obligation or where consent based that any required consent is in place. Where processing is based on consent ensure that there are proper records of that consent. Consent is not likely to be the core legal basis in the insurance industry.
  • Demonstrating compliance is a key area under the accountability requirement of GDPR organisations must be able to demonstrate compliance with the regulation by means of a paper trail.
  • Appoint a DPO (Data Protection officer), The European Data protection working group WP29 has identified the Insurance industry as an industry which should consider appointing a DPO.
  • Appoint an EU Representative where the company is regularly processing personal data of EU data subjects but does not have an establishment in the EU.
  • Data minimisation and privacy by default and design must be a core principle of any data processing.

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