Insurance Vendor Risk Assessment Template

Insurance vendors present unique third-party risks combining financial exposure, regulatory complexity, and vast data access. Your TPAs process millions in claims. Your cyber carriers hold security assessments that could become litigation evidence. Your benefits brokers access employee PII across multiple systems.

A generic vendor questionnaire misses insurance-specific controls. State insurance regulations add layers beyond SOC 2. HIPAA applies to health lines. Financial solvency matters as much as cybersecurity when a carrier holds your reserves.

This template addresses insurance vendor assessment challenges: mapping controls across overlapping regulations, scoring risks for vendors with different data access levels, and collecting evidence that satisfies both procurement and compliance teams. Built from 500+ insurance vendor assessments, it eliminates redundant questions while capturing critical insurance-specific risks.

Core Sections of an Insurance Vendor Risk Assessment

1. Vendor Classification and Data Access Mapping

Start by categorizing the vendor type and data exposure:

Vendor Categories:

• Insurance Carriers (primary, excess, reinsurance)
• Third-Party Administrators (TPAs)
• Insurance Brokers/Agents
• Managed General Agents (MGAs)
• Claims Processors
• Actuarial Services
• Insurance Technology Platforms

Data Access Levels:

Data Type	Examples	Risk Weight
Claims Data	Medical records, loss details, settlement amounts	Critical
Underwriting Data	Applications, risk assessments, pricing models	High
Policy Data	Coverage details, endorsements, declarations	Medium
Payment Data	Premium collections, claim payments, banking details	Critical
Employee Benefits Data	Enrollment, dependents, salary information	High

2. Insurance-Specific Regulatory Compliance

Insurance vendors face unique regulatory requirements:

State Insurance Regulations:

• Data breach notification timelines (varies by state)
• Solvency requirements and financial ratings
• Licensing and appointment verification
• Market conduct examination history

Federal Requirements:

• HIPAA (for health-related lines)
• GLBA (Gramm-Leach-Bliley Act)
• ERISA (for employee benefits)
• OFAC sanctions screening

Include specific control questions:

• "Provide evidence of active insurance licenses in all operating states"
• "Submit most recent AM Best or equivalent financial rating"
• "Detail any regulatory actions, fines, or consent orders in past 3 years"

3. Technical Security Controls

Insurance vendors require enhanced controls due to high-value data:

Access Management:

• Multi-factor authentication for all system access
• Privileged access management for claims systems
• API security for data exchanges
• Third-party access monitoring

Data Protection:

• Encryption at rest and in transit (AES-256 minimum)
• Data loss prevention (DLP) for PII/PHI
• Secure data disposal procedures
• Production data masking in non-production environments

4. Business Continuity and Claims Processing

Insurance operations demand specific continuity planning:

Recovery Objectives:

• Claims processing: 4-hour RTO
• Policy issuance: 24-hour RTO
• Customer service: 8-hour RTO
• Payment processing: Same-day recovery

Testing Requirements:

• Annual full DR test with failover
• Quarterly tabletop exercises
• Post-CAT event reviews
• Cross-vendor dependency mapping

Risk Scoring Methodology

Criticality Factors

Score vendors based on:

1. Data Volume: Number of records accessed annually
2. Data Sensitivity: PII, PHI, financial data exposure
3. Integration Depth: Direct system access vs. portal only
4. Geographic Scope: Multi-state operations increase regulatory risk
5. Financial Impact: Premium volume, claims authority, reserve holdings

Scoring Matrix

Factor	Low Risk (1-3)	Medium Risk (4-6)	High Risk (7-10)
Data Volume	<10K records	10K-100K records	>100K records
Integration	Portal only	API access	Direct database
Financial Impact	<$1M	$1M-$10M	>$10M

Industry-Specific Applications

Financial Services

Focus areas:

• Cyber liability insurance providers
• D&O insurance carriers
• Fidelity bond providers
• Business interruption insurers

Key controls:

• SEC reporting requirements
• FFIEC compliance alignment
• Systemic risk assessment

Healthcare

Focus areas:

• Medical malpractice insurers
• Health plan TPAs
• Workers compensation carriers
• Stop-loss providers

Key controls:

• HIPAA business associate agreements
• State medical record retention
• EDI transaction security
• Minimum necessary access

Technology Companies

Focus areas:

• Errors & omissions carriers
• Cyber insurance providers
• Business liability insurers
• Key person life insurance

Key controls:

• Source code escrow provisions
• Intellectual property protections
• Breach response procedures
• Tech E&O claims history

Implementation Best Practices

1. Pre-Assessment Preparation

• Pull existing vendor contracts and SLAs
• Document current data flows and integration points
• Identify regulatory requirements by jurisdiction
• Set risk appetite thresholds

2. Evidence Collection Strategy

Prioritize evidence by risk tier:

Tier 1 (Critical Vendors):

• SOC 2 Type II reports
• Financial statements
• Penetration test results
• Insurance certificates
• Regulatory examination reports

Tier 2 (Important Vendors):

• SOC 2 Type I or bridge letters
• Security policy documentation
• Business continuity plans
• Incident response procedures

Tier 3 (Low Risk):

• Self-attestation questionnaire
• Basic insurance verification
• Reference checks

3. Assessment Frequency

Trigger reassessment for:

• Merger or acquisition activity
• Data breach notifications
• Regulatory enforcement actions
• Material contract changes
• Geographic expansion
• New data access requests

Common Implementation Mistakes

1. Treating All Insurance Vendors Equally

A small broker accessing employee census data poses different risks than a TPA processing medical claims. Tailor assessments to vendor type and access level.

2. Ignoring State-Specific Requirements

Insurance is state-regulated. A vendor compliant in New York might violate California privacy laws. Map controls to each operating jurisdiction.

3. Accepting Outdated Financial Ratings

Insurance financial stability changes quarterly. Require current ratings, not last year's assessment. Set up monitoring alerts for rating downgrades.

4. Missing Subcontractor Risks

Insurance vendors extensively use subcontractors. Your TPA might offshore claims processing. Require full downstream vendor disclosure and flow-down provisions.

5. Inadequate Breach Notification Terms

Standard 72-hour breach notification won't meet insurance regulatory timelines. Some states require 24-hour notice. Align contract terms with strictest applicable requirements.

Frequently Asked Questions

How often should insurance vendor assessments be updated?

Conduct full reassessments annually for Tier 1 vendors, with quarterly check-ins on financial ratings and regulatory status. Trigger immediate reviews for M&A activity, breaches, or examination findings.

What's the difference between a SOC 2 and insurance regulatory compliance?

SOC 2 covers security controls but misses insurance-specific requirements like state licensing, solvency standards, and claims handling regulations. You need both for complete coverage.

Should we assess insurance brokers differently than carriers?

Yes. Brokers access data across multiple carriers and employers, creating aggregation risk. Focus on access controls, data segregation, and clear data retention/destruction policies.

How do we handle vendors refusing to complete our questionnaire?

Provide SOC 2 crosswalk showing how their report maps to your requirements. For gaps, accept specific attestations rather than full questionnaire completion. Document risk acceptance for any remaining gaps.

What evidence is legally required vs. nice to have?

Legally required varies by state but typically includes: active licenses, HIPAA BAAs (for health lines), breach insurance, and financial ratings. Everything else supports risk decisions but isn't mandated.