Insurance Data Protection Act Limits Federal Subpoenas, Mandates Regulators Share Data First

The newly proposed Insurance Data Protection Act is looking to change the rules of the road for how federal financial watchdogs interact with the insurance industry, primarily by restricting government access to company data and information. The bill makes several key moves: it removes a specific federal subpoena power, restricts the investigative reach of the Office of Financial Research (OFR) against insurers, and forces regulators to check existing databases before demanding new data.

The Watchdog’s Leash Gets Shorter

One of the most notable changes involves federal oversight. Section 2 of the bill simply deletes an existing government authority to issue and enforce subpoenas under a specific section of the U.S. Code (Section 313(e)(6) of title 31). This means a specific enforcement tool is now off the table. Think of it like taking away one specific key from a detective—it might not stop the investigation, but it definitely makes accessing certain doors harder.

Even more specific is the change to the Office of Financial Research (OFR). The OFR was created to spot systemic risks that could crash the economy, but Section 4 now explicitly prohibits it from using its general subpoena power against any entity defined as an “insurance company.” If the OFR suspects an insurer is posing a risk, it can no longer go directly to the source with a subpoena. For everyday people, this matters because the OFR’s job is to prevent the next financial crisis; limiting its ability to investigate a major sector like insurance could mean blind spots in the system.

No More Duplicates: The Data Collection Mandate

Perhaps the most significant procedural change is detailed in Section 5, which deals with how financial regulators collect data from insurance companies. Before any federal regulator—like the SEC, CFTC, or the Financial Stability Oversight Council—can ask an insurance company for non-public data, they must first do their homework. They are now required to check with every other relevant federal agency, state insurance regulator, and public source to see if that exact information already exists and can be obtained quickly.

If the data is available elsewhere, the regulator must get it from that source instead of asking the insurance company directly. This is a massive win for insurance companies, reducing their administrative burden from constant, often duplicative, data requests. For the rest of us, the hope is that reduced regulatory compliance costs might translate into lower operating expenses, but the practical challenge is the time it takes for regulators to complete this mandatory search before they can get the information they need to do their job.

Protecting the Paper Trail

This Act also heavily focuses on protecting the confidentiality and legal privileges of the shared data. Section 3 ensures that when the Federal Insurance Office (FIO) shares non-public data with other agencies, the original confidentiality protections and legal privileges (like attorney-client privilege) remain intact. Similarly, Section 5 reinforces that when an insurance company hands over data to a financial regulator, it doesn't automatically waive its right to keep that information secret. This provision aims to give insurance companies confidence that sensitive business information—say, proprietary risk models or internal legal memos—won't lose its protected status just because a regulator needed to look at it.