United States: NAIC Introduces New Insurance Data Security Model Law for Comment

Last week, the Cybersecurity Task Force of the National Association of Insurance Commissioners voted to subject the new "Insurance Data Security Model Law" for public comment during the brief period between now and Wednesday, March 23. The NAIC has also announced that the new model law will be discussed at the Cybersecurity Task Force's meeting during the NAIC's spring meeting in New Orleans, currently scheduled for 2:30 p.m. on Monday, April 4.  

The new model act builds on four of the NAIC's previously released works, and then goes further to implement specific practices and penalties. First, the new model law incorporates elements of two prior model laws – the Insurance Information and Privacy Protection Model Act (the Privacy Protection Model Act), currently adopted in approximately one-third of the states, and the Privacy of Consumer Financial and Health Information Regulation, currently adopted in more than two-thirds of the states – both of which are currently under review for amendment. The new model law also builds on the NAIC's previously announced Principles for Effective Cybersecurity: Insurance Regulatory Guidance and the NAIC Roadmap for Cybersecurity Consumer Protections (fka the Cybersecurity Bill of Rights). The new model law is not circumscribed by these prior pronouncements; rather, it addresses specific practices and has a wider scope than earlier models.  

Types of information: The scope of the new model law reaches many types of personal information, including "information that the consumer provides...to obtain an insurance product," "information about the consumer resulting from a transaction involving an insurance product or service," or information obtained "in connection with providing an insurance product or service" but all within products or services "used primarily for personal, family or household purposes." 

Parties regulated: The new model law specifically applies to licensed insurers and producers, but it also talks about persons "required to be authorized or registered," perhaps signaling an intent to regulate more than just admitted primary insurers. The model law, however, does not stop there. It also requires licensees to contractually mandate that third-party service providers maintain safeguards, notify of breaches and indemnify the licensees against losses due to the breach. Finally, the model law invokes the McCarran-Ferguson Act to pre-empt enforcement of "federal law or regulation regarding data security or investigation or notification of a breach of data security" in regard to licensees. It remains to be seen whether this pre-emption could reach noninsurance members of an insurance holding company system.  

What is required of the licensee:

  1. An information security program to control risks and anticipate threats, using the Framework for Improving Critical Infrastructure Cybersecurity by the National Institute of Standards and Technology as a guide, but including (i) access controls on information systems; (ii) restrictions on access to physical locations; (iii) encryption of data, both in transit and at rest; (iv) design procedures to ensure security of system modifications; (v) multifactor authentication; (vi) system monitoring; (vii) actions to be taken in the event of a breach; (viii) measures to prevent data loss due to fire, water or other perils; and (ix) procedures for disposal of personal information. The program should be appropriate to the size and complexity of the licensee.
  2. Board of directors' oversight of the development and maintenance of the information security program as well as approval of the written program. The new model law mandates that the board assign specific responsibility for the implementation of the program.
  3. Mandatory provisions in contracts with third-party service providers, including contractual enforcement of appropriate safeguards, notice, indemnification, audit and representation/warranties of compliance. Note: if history is a guide, it is possible that vendors will resist some of these conditions.
  4. Ongoing monitoring and adjustment of the information security program in light of changes in technology, threats, personal information and business arrangements (such as mergers, acquisitions and joint ventures). 

  5. Investigation of any breach, including assessment of the incident, identification of any personal information involved, and implementation of measures to restore the security and confidentiality of any compromised systems. 
  6. Notification to (i) the commissioner within five days that provides a highly detailed list of items, (ii) consumers and law enforcement "without unreasonable delay" if consumers face a risk of substantial harm or inconvenience, (iii) consumer reporting agencies within 60 days if the breach involves a specified number or more of consumers, and (iv) consumers – by mail unless the consumer has agreed to email – within 60 days of identifying the breach, including giving the commissioner a draft within 45 days of the breach and allowing him to edit the notice. Notification to the commissioner and consumers (along with identity theft protection services) is also required in the event of a breach by a third-party provider.
  7. Provision of an offer of credit identity theft protection services to affected consumers for a minimum of 12 months.

Examination, hearing and penalties: The new model law also provides for examination and investigation of a licensee along with the regulator's power to hold hearings in the event of a violation. Any adversely affected person must be allowed to intervene upon showing good cause. If a violation is found, the commissioner will provide written findings and serve a cease and desist order on the licensee. If no violation is found, the report must be served on those whose rights were allegedly violated. The model law provides for suggested penalties of up to $500 per violation, up to a maximum of $10,000, plus $10,000 per violation of a cease and desist order, up to a maximum of $50,000. The model law provides for judicial review by a court.  

Individual remedies: The new model law borrows some individual remedy provisions from the Privacy Protection Model Act, allowing consumers to bring private actions seeking equitable relief for violations of consumer rights. The new model law also permits consumers to recover costs and attorney fees if they should prevail. The new model law does not contain the Privacy Protection Model Act's prohibition on monetary awards exceeding actual damages but does say that there will be no remedy or recovery except as specifically provided.  

Confidentiality: Information provided pursuant to the model law is to be protected from FOIA-type disclosure and subpoena of regulators receiving information; however, it is not entirely clear whether such protection would extend to all disclosures required under the model law.

This new model law provides for extensive regulation of insurers and producers, reinforced by examinations and penalties. The new model law is specifically oriented toward mandating security procedures and imposing penalties for breaches and resulting disclosures, whereas the Privacy Protection Model Act has been oriented toward identifying permitted disclosures, and the Privacy of Consumer Financial and Health Information Regulation is oriented toward privacy policies and violations of those policies. Neither of the prior models imposes substantial obligations in regard to the conduct of third parties as the new model law does. The two prior cybersecurity pronouncements of the NAIC, the Roadmap and the Principles, lack the high level of specificity found in the new model law. Given the bold statement about pre-emption of federal law, insurers and producers who believe this new model law would have an unwarranted adverse effect on them are encouraged to comment on or before March 23. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

William D. Goddard
Steven A. Cash
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions