Final answer:
Insurers are prohibited from disclosing privileged information as mandated by privacy laws such as HIPAA. Disclosure is illegal when it violates confidentiality unless consent is provided or law requires. Reporter's privilege protects journalistic sources, while moral hazard affects information asymmetry in insurance.
Step-by-step explanation:
It is illegal for an insurer to disclose privileged information about an insured in scenarios where such disclosure would violate privacy laws, such as the Health Insurance Portability and Accountability Act (HIPAA). HIPAA mandates strict confidentiality of patient records. This means that insurers and healthcare providers cannot release information that could compromise an individual's privacy rights unless specific consent has been given or in certain circumstances mandated by law. For example, contacting a patient's sexual partners and revealing the patient's diagnosis would likely constitute a violation unless it falls under public health exception provisions.
In the realm of journalism, reporter's privilege offers protection for sources providing confidential information to the press. This concept is backed by the First Amendment to encourage whistleblowers and government employees to come forward with information about questionable government practices, contributing to public interest and accountability.
When discussing insurance, the concept of moral hazard arises. People who are insured may take fewer precautions against risks because they know they have financial coverage through their insurance, which can result in an asymmetry of information between them and the insurer. Nevertheless, the insurer is bound by law and policy terms to safeguard their clients' personal data.