As reported in the previous edition of Corporate Insurance In-Sight, US insurance regulators have increased their scrutiny of cyber security measures of insurance companies in light of significant cyber attacks against businesses including insurance companies.
On 16 April 2015, the NAIC Cybersecurity Task Force adopted twelve “guiding principles” for effective cyber security by insurance companies. This adoption followed the inaugural meeting of the NAIC Cybersecurity Task Force at the NAIC Spring 2015 National Meeting on 29 March 2015. The guiding principles are brief and relatively broad. For example, Principle 2 provides that “Confidential and/or personally identifiable consumer information data that is collected, stored and transferred inside or outside of an insurer’s, insurance producer’s or other regulated entity’s network should be appropriately safeguarded”; similarly, Principle 4 provides that “Cyber security regulatory guidance for insurers and insurance producers must be flexible, scalable, practical and consistent with nationally recognized efforts such as those embodied in the National Institute of Standards and Technology (NIST) framework.”
In addition to the guiding principles, the NAIC Cybersecurity Task Force’s work plan includes development of a “Consumer Bill of Rights” that will set forth consumers’ rights following a data breach at an insurance company; work on NAIC model laws regarding health information privacy, consumer financial and health information, safeguarding of consumer information, and insurance fraud prevention; and survey of states on cyber security measures.
Beyond the NAIC’s work in this area, various US state insurance regulators have independently been focusing on cyber security issues. In particular, the New York Department of Financial Services (NYDFS) has raised heightened concerns regarding cyber security at entities that it regulates. Following upon its February 2015 Report on Cyber Security in the Insurance Sector, NYDFS issued an information request on 26 March 2015 to the largest insurers in New York requesting a confidential report on their cyber security measures by 27 April 2015. The request is quite detailed in the types of information regarding the insurers’ informational technology/cyber security framework that it demands. It covers issues ranging from the qualification requirements for an insurer’s chief technology officer and information risk management policies (including with respect to third-party vendors) to specific points such as multi-factor authentication and adherence to the NIST framework.
The answers to the request will be used by NYDFS to undertake a “comprehensive risk assessment of each institution” under its supervision. This request follows on the announcement NYDFS made when it released its February report on cyber security that it will “integrate regular, targeted assessments of cyber security preparedness at insurance companies as part of [its] examination process” going forward.
The current pronounced and increasing regulatory focus on cyber security in the insurance industry means that insurance companies, insurance producers and any service providers or vendors for the insurance industry should review their cyber security processes and procedures and prepare for increasing scrutiny and regulation in this area.