user_insert.php

/**
 * Implements hook_user_insert().
 * Add default privacy settings.
 */
function MYMODULE_user_insert(&$edit, $account, $category) {
  // Add default privacy settings into users.data
  $instances = field_info_instances('user', 'user');
  $field_settings = array();
  foreach ($instances as $field_name => $field_info) {
    // Lets make it PUBLIC by default.
    $field_settings[$field_name] = CORE_SECURITY_PRIVACY_PUBLIC;
  }
  $data['privacy_settings'] = $field_settings;
  user_save($account, array('data' => $data));
}