United States: Insurance Commissions Approve Data Security Model Law

Last Updated: December 13 2017
Article by Brian H. Lam

The National Association of Insurance Commissioners (NAIC) has approved its draft of the Insurance Data Security Model Law (Model Law) via a meeting of its Executive and Plenary Committees. This important development follows New York Department of Financial Services ("DFS") Cybersecurity Requirements for Financial Services Companies regulation that took effect on March 1, 2017 (DFS Cybersecurity Regulation) that we have covered previously.

NAIC likely recognizes that the numerous data breaches that have occurred over the past year have created an opportunity to build upon the momentum created by the DFS Cybersecurity Regulation, and provide an environment of comprehensive compliance requirements to protect Licensees and Consumers. Indeed, the Model Law even contains Drafting Note stating that:

The drafters of this Act intend that if a Licensee, as defined in Section 3, is in compliance with N.Y. Comp. Codes R. & Regs. tit.23, § 500, Cybersecurity Requirements for Financial Services Companies, effective March 1, 2017, such Licensee is also in compliance with this Act.

In many cases, model laws approved by NAIC, a U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories, are approved within these jurisdictions as binding law. Below is a high level overview of particularly salient points of the Model Law.

1. The Model Law Would Apply To All Licensees

The Model Law is intended to apply to any "Licensee" which is defined as "any Person licensed, authorized to operate, or registered, or required to be licensed, authorized, or registered pursuant to the insurance laws of this State." The definition excludes "a purchasing group or a risk retention group chartered and licensed in a state other than this State or a Licensee that is acting as an assuming insurer that is domiciled in another state or jurisdiction."

2. Licensee Must Identify And Assess Risks To Nonpublic Information

All Licensees will be required to designate a responsible party, be it one or more employees, an affiliate or outside vendor. The risk assessment should be appropriate for the Licensee based on reasonably foreseeable internal or external threats that could result in unauthorized access, misuse or destruction of Nonpublic Information.

Nonpublic Information is quite broadly defined. It can consist of any information whose disclosure would create a material impact to business, operations or security of the Licensee, or any information that could be used to identify a consumer along with one or more of the following: (1) SSN, (2) Driver's license or identification card number, (3) Account number, credit or debit card number, (4) any security code, access code or password that would permit access to a Consumer's financial account, (5) Biometric records. Further, information besides age or gender, data derived from a healthcare provider or Consumer and involving the healthcare of the Consumer or the Consumer's family, within broad categories, would qualify as well.

Conducting this risk assessment will require a detailed understanding by the Licensee of the information flows and risk factors faced by the organization, including leveraging of Third-Party Service Providers that the Licensee contracts with.

3. Licensees Must Implement And Maintain A Written Information Security Program To Mitigate Identified Risks

Based on the findings of the risk assessment above, and "[c]ommensurate with the size and complexity of the Licensee, the nature and scope of the Licensee's activities, including its use of Third-Party Service Providers, and the sensitivity of the Nonpublic Information used by the Licensee or in the Licensee's possession, custody or control" each Licensee must implement and maintain a written Information Security Program.

The Information Security Program must protect the security and confidentiality of Nonpublic Information and the Information System as a whole, including minimizing the likelihood of harm to any Consumer. The Information Security Program must define and periodically reevaluate a schedule for retention of Nonpublic Information and destruction of the same.

Numerous requirements, including appropriately restricting physical access, use of appropriate controls, and regular testing are also enumerated. Further, Licensees are required to "[p]rotect by encryption or other appropriate means, all Nonpublic Information while being transmitted over an external network and all Nonpublic Information stored on a laptop computer or other portable computing or storage device or media."

An appropriate incident response plan designed to allow the Licensee to "recover from, any Cybersecurity Event that compromises the confidentiality, integrity or availability of Nonpublic Information in its possession, the Licensee's Information Systems, or the continuing functionality of any aspect of the Licensee's business or operations" must also be established.

The definition of Cybersecurity Event is broad. Any "event resulting in unauthorized access to, disruption or misuse of, an Information System or information stored on such Information System" will be deemed a Cybersecurity Event.

4. Annual Compliance Certification And Five Year Period of Records Retention Required

Each insurer domiciled in any state enacting the model law will be required to submit annually, by February 15th, a certification certifying compliance with the Model Law. Further, records supporting this certification must be maintained for no less than five years. If the insurer identifies areas that require material improvement, this must be documented and available for inspected by the Commissioner, who shall be the chief insurance regulatory official of the state.

5. Cybersecurity Event Investigation Requirement

Any Cybersecurity Event, defined as any "event resulting in unauthorized access to, disruption or misuse of, an Information System or information stored on such Information System" must be investigated promptly. The investigation must determine to the extent possible: (1) if a Cybersecurity Event occurred, (2) if so, the nature and scope of the Cybersecurity Event, (3) identify any impacted Nonpublic Information, (4) and perform reasonable measures to restore security and prevent further unauthorized acquisition, release or of Nonpublic Information. If a Third-Party Service Provider has a Cybersecurity Event, the Licensee is responsible for conducting the same investigation of Third-Party Service Provider or ensuring that the Third-Party Service Provider completes the same.

Records concerning all Cybersecurity Events must be maintained for at least five years and produced to the Commissioner upon demand.

6. Cybersecurity Event Reporting Requirement

Cybersecurity Events must be reported to the Commissioner "as possible but in no event later than 72 hours from a determination that a Cybersecurity Event has occurred" where either of two conditions are satisfied.

First, the reporting requirement applies when the state of occurrence is the Licensee's home state if the Licensee is a producer, as defined by the Producer Licensing Model Act. Second, the requirement applies if the Licensee reasonably believes that the Nonpublic Information of more than 250 Consumers within the state would be impacted and any state or federal law would require notice to a government body, or if the Cybersecurity Event has a "reasonable likelihood of materially harming any Consumer residing within the state or a material part of the normal operations of the Licensee.

7. Third-Party Service Provider And Appropriate Measures Requirement

Licensees must exercise due diligence in selecting any Third-Party Service Provider. Further, "Licensee[s] shall require a Third-Party Service Provider to implement appropriate administrative, technical, and physical measures to protect and secure the Information Systems and Nonpublic Information that are accessible to, or held by, the Third-Party Service Provider." Please note that this would also need to be accomplished at least through the required written Information Security Program as discussed above.

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.

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
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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