Data Protection and Regulatory Compliance in the Insurance Industry

Insurance companies handle vast amounts of sensitive customer data such as personal information, financial records, and health details. As such, they must comply with strict data protection requirements. Failure to comply with these regulations can result in severe penalties, reputational damage, and loss of customer trust.

In this article, you’ll learn about the best data protection practices for the insurance industry. These practices can help your organization meet relevant regulatory requirements, safeguard critical systems, and keep sensitive data safe.

Types of data insurance companies work with

If banks hold the money, insurers hold the data.

Insurance organizations process their customers’ personal data to underwrite risks and provide favorable services. Personal data is the lifeblood of insurance providers, as only comprehensive and accurate information about customers allows insurance companies to offer viable and sustainable policies.

For instance, insurance providers need access to the data from customers’ health and criminal records to calculate premiums and process claims. In the case of employer-sponsored coverage, insurance companies require an employment contract as the legal basis for creating a policy.

Depending on the type of insurance services provided, insurers collect a wealth of data on individuals covering their health, property, vehicles, and even pets. Here are the most common types of sensitive data insurers interact with:

Given the nature of this data, the insurance industry faces considerable risks when it comes to safeguarding information.

Data breaches in the insurance industry

Where does the threat come from?

Cyberattacks in the insurance industry often don’t exploit system vulnerabilities but instead target careless employees and subcontractors.

According to Verizon’s 2024 Data Breach Investigations Report, the most common causes of data breaches in the insurance and financial industries include social engineering, system intrusion, and human error.  

Let’s take a look at some of the most alarming data breaches that have shaken the insurance industry in recent years:

Case #1. Medibank data breach

Medibank could have prevented the breach by implementing multi-factor authentication, privileged access management, and user activity monitoring.

Case #2. MCNA Dental data breach

The company could have prevented this ransomware attack by implementing strong authentication mechanisms and protecting endpoints with robust cybersecurity solutions.

Case #3. Aflac data breach

This breach highlights the importance of continuously auditing and monitoring third-party vendors.

Case #4. Zurich data breach

This is another data breach that could have been prevented with the help of efficient third-party security monitoring solutions.  

Data breaches like these can result in user privacy violations, customer dissatisfaction, legal penalties, and hefty fines. This is why protecting personal data should be the utmost priority of insurance companies. However, safeguarding sensitive data is becoming more and more challenging due to the tricky nature of evolving threats. 

The main challenges of data protection in the insurance industry

Know what your organization is up against.

The insurance industry faces a growing number of cybersecurity challenges. Among them, we can highlight four of the most common: 

Sophisticated cyberattacks

Cybercriminals continuously refine their attack strategies, exploiting vulnerabilities with advanced tactics. The use of AI for social engineering attacks has significantly escalated threat levels. AI can be used to create convincing phishing emails, conduct real-time interactions through AI-driven chatbots, or even generate fake videos or audio mimicking company executives to manipulate employees into performing malicious actions.

Ransomware attacks have also grown dramatically in recent years, becoming a major challenge in the insurance industry. In modern ransomware attacks, cybercriminals encrypt and exfiltrate critical data, then demand a ransom upon threat of release to restore access to it. These attacks can paralyze business operations, leading to service interruptions and data loss.

The human element

Unlike external attackers who need to infiltrate your perimeter’s defenses, people on the inside of your system — your employees, contractors, and partners — already have legitimate access to your sensitive systems and data. This access makes the harmful actions of insiders harder to detect, monitor, and mitigate. 

Insiders may inadvertently expose sensitive data by mishandling information or failing to follow security protocols. For instance, an employee might unknowingly share confidential client data over unsecured communication channels or input sensitive data into an AI chatbot. When it comes to malicious intent, insiders can more easily steal policyholder data to commit fraud or sell to competitors. To make matters worse, they’re often able to bypass traditional security measures.

Poor third-party security

Insurance companies frequently partner with third-party vendors for claims processing, risk analysis, and customer services. However, every new contractor makes it harder for organizations to maintain a secure IT environment.

As we saw in our real-life data breach examples, hackers often exploit vulnerabilities in third-party systems to gain access to the sensitive data in an insurer’s possession. For example, a vendor with weak cybersecurity defenses can be targeted through phishing attacks, allowing cybercriminals to infiltrate your network​.

Moreover, insurance companies often have limited knowledge of their vendors’ security practices and can’t evaluate the cybersecurity measures they implement. Vendors that do not adhere to cybersecurity standards can expose insurance companies to legal and regulatory penalties. Keep in mind that if a third party suffers a breach involving your business’s customer data, you’ll be held accountable under regulations like the GDPR and HIPAA.

Complex cloud infrastructures

Since insurance companies are increasingly adopting cloud technologies, they face new challenges in ensuring data security and privacy. Cloud environments often involve multiple interconnected systems, making them quite challenging to manage. 

Improper cloud infrastructure setup, such as open ports or overly permissive access policies, can create vulnerabilities that attackers can exploit to get into your systems. Insurance organizations can also suffer denial-of-service (DoS) attacks that often lead to service outages and business disruptions. 

The worst part? Since сloud environments lack the visibility inherent to on-premise infrastructure, it’s much harder for security teams to monitor user activity and detect potential security incidents.  

In addition to the challenges described above, insurance companies face the difficulty of meeting industry-specific compliance standards, laws, and regulations.

Compliance requirements for the insurance companies

Reduce the risk of data breaches with regulatory compliance.

Insurance providers are obliged to follow data protection requirements and can face strict penalties for non-compliance. Let’s take a look at the major regulations, acts, and standards concerning data protection in the insurance industry.

To protect network and information systems:

• The Network and Information Security Directive 2 (NIS2) is a key regulation for EU organizations, including insurance providers. The directive mandates that organizations implement strong security measures for their IT infrastructure, report significant cybersecurity incidents promptly, and manage third-party cybersecurity risks. 
• The Federal Information Security Management Act (FISMA) applies to US-based insurance companies working with government data. This regulation aims to protect federal information systems and requires that companies implement security controls based on the NIST 800-53 standard for risk management and information security.
• System and Organization Controls 2 (SOC 2) ensures that service providers, including insurance companies, securely manage data to protect the privacy and interests of their clients. For insurance companies, adhering to SOC 2 standards means implementing controls that protect customer data against unauthorized access, guarantee the availability of the system, maintain data integrity, and preserve data privacy.

ISO/IEC 27001 is an international voluntary standard for organizations. To demonstrate compliance with ISO 27001, insurance organizations must implement a comprehensive information security management system (ISMS) to protect their network, systems, and data from cyber threats. Compliance involves regular audits, risk assessments, and continual improvement of security practices.

Depending on the type of sensitive data collected and processed in order to provide insurance services, organizations have to comply with the following:

To protect personal data:

• The General Data Protection Regulation (GDPR) aims to secure personal information of European Union residents. Insurers that provide services to EU residents must comply with GDPR requirements regardless of where their business is registered and where business activity occurs.
• The California Consumer Privacy Act (CCPA) controls the collection, use, and sale of personal information of California residents. Insurance companies operating in California are subject to the CCPA, which includes disclosure obligations and requirements related to consumer privacy rights.
• The Personal Information Protection and Electronic Documents Act (PIPEDA) regulates how private sector organizations collect and use personal information of Canadian residents for commercial activity. Insurers across Canada are obliged to comply with PIPEDA requirements.

To protect healthcare data:

• The Health Insurance Portability and Accountability Act (HIPAA) places rules on how health-related data can be collected, stored, and processed in the US. HIPAA aims to prevent fraud and abuse of personal healthcare data. US insurance providers dealing with medical records are required to implement adequate healthcare data protection to avoid fines for HIPAA violations.

To protect financial data:

• The Gramm–Leach–Bliley Act (GLBA) is a US law that requires insurance companies to explain their information sharing practices to customers and to protect customers’ sensitive data. It also obliges insurers to track employees’ activities, especially those that relate to accessing customers’ protected records.
• The Sarbanes–Oxley Act (SOX) aims to make the activity of US insurance organizations more transparent and secure. It also prevents fraudulent actions and protects financial records. To meet SOX requirements, insurance organizations use dedicated SOX audit software and have to document every communication and financial operation.
• The Payment Card Industry Data Security Standard (PCI DSS) safeguards the security of credit card processing. Insurance providers around the world must have a PCI DSS compliance system if they accept credit cards or store information about them (such as for payment of insurance policy premiums).

Note: In addition to these major data protection regulations for insurance organizations, you may also need to comply with other local and international laws and regulations regarding customers’ personal data.

8 best practices for data protection and regulatory compliance in the insurance industry

Take these steps to achieve compliance.

Complying with data protection requirements can be a real challenge for insurance companies. Here’s a list of eight best practices that will help you properly protect your customers’ sensitive data with minimal effort:

1. Appoint a data protection officer

Designate one or more employees to control and enforce data protection policies in your organization. Meeting this GDPR and PCI DSS obligation will greatly assist you with ensuring data protection, passing security audits, and responding to security incidents.

2. Conduct a risk assessment

To fully protect your customers’ information, you need to know what types of sensitive data you work with and how this data is stored and processed. Only when you’ve identified your valuable assets can you assess your risks and start eliminating weak spots in your cybersecurity.

3. Ensure secure access to data

Protect access to your critical assets by implementing the principles of zero trust and least privilege. These principles allow you to control who can access your customers’ information and what they can do with that data. You can protect access to your IT infrastructure with multi-factor authentication (MFA). Additionally, consider using password management solutions to safeguard the use of passwords within your organization.

4. Monitor user activity

Employee activity monitoring is one of the main requirements of cybersecurity acts, standards, and regulations including SOX, PCI DSS, and GLBA. Some dedicated IT security solutions allow you to continuously record all employees’ actions with sensitive data without jeopardizing employees’ privacy. Modern solutions with AI-based behavior analytics can immediately inform you about any abnormal employee activity and help you prevent a data breach long before it happens.

5. Manage privileged users

Employees with privileged access to your IT infrastructure are the most common targets of cyber attackers. To prevent unauthorized access, employ a privileged access management (PAM) solution to help you control user privileges and monitor the activity of privileged accounts. To avoid credential abuse, you can enhance privileged user access with one-time passwords and time-based access restrictions.

6. Reduce third-party risks

Take care to pay close attention to contractual security arrangements and ensure that vendors comply with them. You should also monitor who accesses important data and for what purposes. You may be required to audit applications that third-party service providers use to access customer data. Therefore, the best way to ensure regulatory compliance and data protection in the insurance sector is to monitor third-party vendors using dedicated cybersecurity tools.

7. Encrypt data

To ensure the safety of critical data both at rest and in transit, make it unreadable for those who might obtain it. Data encryption is either required or recommended by the GDPR, GLBA, PCI DSS, and other regulations, laws, and standards. Use encryption to avoid the compromise of customer information in case of a data breach. This measure can also save you from paying millions of dollars to affected customers.

8. Prepare for a fast incident response

An incident response plan will help you mitigate the consequences of a data breach and is part of most compliance requirements for insurance companies. You can make an incident response plan as a separate document or as part of your cybersecurity policy. With this plan, cybersecurity officers and regular employees will know what actions they should take for each type of security incident, who they should inform, and within what time frames. The time frames for notifying a supervisory authority about a breach of personal data vary. For instance, the GDPR sets a 72-hour notification deadline after you become aware of a cybersecurity incident, whereas NIS2 requires you to issue notification for any major security incident within 24 hours of its detection.

Following these best practices for data protection and compliance will improve the security of your insurance organization, help you avoid penalties, and increase customer trust and loyalty. For maximum ease of implementation, deploy a HIPAA, SOX, PCI DSS, or GDPR compliance platform.

Meet data protection requirements with Syteca

Comply with multiple requirements using one solution.

Deploying designated cybersecurity software for employee monitoring allows you to process and store customer data securely and in compliance with relevant laws, regulations, and standards. With Syteca, you can get more than just user activity monitoring.

Syteca offers the following capabilities for meeting compliance requirements and preserving insurance data privacy:

• Privileged access management (PAM) for granularly controlling access to critical endpoints and getting full visibility over the activity of privileged users.
• Identity management for ensuring that only authorized employees have access to your critical assets.
• User activity monitoring (UAM) for controlling employee activity in real time and recording user sessions in screen capture format with helpful metadata on user activity.
• Real-time incident response for getting notified of suspicious events so you can respond to them quickly by warning or blocking users.
• Anonymization of monitored data for enhanced protection of sensitive information.
• Detailed reporting for creating a forensic trail for investigating security events using session analysis.

As an all-in-one cybersecurity platform, Syteca helps you meet multiple data protection regulations and standards in one go.

Conclusion

Meeting numerous data protection regulations and standards can be challenging for insurance providers. Leverage the best practices from this article and use a robust security solution to reduce compliance overhead.

Comprehensive cybersecurity platforms like Syteca can streamline compliance with data protection regulations and industry standards by providing your organization with user activity monitoring, privileged access management, incident response, and other data protection functionalities.