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4 Essential Elements to Third-party Risk Management in the Insurance Industry

Companies depend on SaaS offerings and outsourcing services more than ever. This increased reliance on third parties intersects with huge amounts of data that have become so essential to business outcomes. As that data moves among disparate software systems and across vendors, the attack surface of the organization increases—as does the potential for costly security breaches and other risks. 

Managing these risks effectively is essential, but it’s never been a bigger challenge. This is true in every industry, but there are a number of important factors that make third-party risk management (TPRM) especially complex for Insurance.

Let’s take a look at the unique TPRM challenges facing insurers—and what the industry can do about them.   

Top Vendor Risk-management Challenges for the Insurance Industry 

Though Insurance companies vary from one another in size and product offerings, they all share a set of particular characteristics that set them apart from other industries and make TPRM a very specific challenge. Here are the key risk differentiators insurers face:

High volumes of sensitive data
Because of the breadth of services insurers provide and the data-driven nature of their business, they work with enormous amounts of personal identifiable information (PII)—including (but not limited to) healthcare data, financial records, and proprietary actuarial data. Rigorous controls are necessary to secure this data, retain customer trust, and protect against reputational harm. 

Reliance on business process outsourcing (BPO)
In addition to a third-party ecosystem of traditional software and SaaS vendors, insurers also rely on an extended network of outsourcing vendors for critical business operations, including:

  • Claims processors to ensure fast, accurate settlements
  • Policy administrators to manage new policies, renewals, or changes
  • Billing and collections services to process and reconcile payments
  • Underwriters for risk analysis 

These business-critical vendors require access to core systems and the kinds of highly sensitive data that are most targeted by cyber criminals, so any viable TPRM approach must focus on security controls, vendor reliability and resilience, business continuity, and disaster recovery. 

Regulatory compliance complexity
Insurance companies must ensure their vendors remain compliant with an ever-changing regulatory landscape that includes the Insurance Data Security Model Law, HIPAA, GLBA, GDPR, PCI DSS, and SOX—among others.

Multi-regional operations
The challenges surrounding regulations and compliance are compounded by the fact that many insurers operate across jurisdictions both domestically and globally. This means that risk management must account for regulatory differences, with a special premium on contract language to address variances. 

TPRM Must-haves for the Insurance Industry

These challenges may be unique to insurers, but they aren’t insurmountable. Companies in the industry should build a third-party risk management program suited to their particular needs. Successful TPRM for Insurance consists of four key pillars.  

1. Governance
Governance of your third-party risk management establishes clear lines of responsibility across the diverse group of stakeholders that will impact (or be impacted by) the process. This is especially important for insurance companies that utilize BPO vendors in addition to traditional software solutions, as more teams are affected by these vendor relationships. A strong approach to governance will include:

  • A TPRM committee for vendor oversight that includes representatives from Compliance, Legal, Procurement, IT, InfoSec, and Business Continuity
  • Defined metrics for reporting to ensure you track the most important KPIs around risk exposure and compliance status, vendor performance, and incident management
  • Clear security requirements in your vendor contract language
  • Additional requirements for fourth parties in the extended vendor supply chain

2. Policies and Procedures
Standardization and consistency in your TPRM approach help to clearly identify and measure risk, spot gaps in your program, ensure necessary controls, and build strong incident response and disaster recovery plans. Your governance team should create processes for: 

  • Building and maintaining an accurate vendor inventory
  • Ranking risk factors for your business; for the Insurance industry, these include vulnerability to a breach, operational disruptions, reputational damages, or legal consequences 
  • Classifying vendors into tiers based on these risks

3. Security and risk assessments 
Due diligence is particularly important to insurance companies because of the unique vectors of risk inherent to the industry. Assessments help to ensure regulatory compliance, document due diligence, identify and manage risk, evaluate the resilience of your vendor ecosystem, and develop strong third-party relationships. When developing your assessment plan, here are few things to keep in mind:

  • Match the right assessment to the right vendor risk profile based on your risk-ranking criteria. Rely on industry standard security frameworks wherever possible, as these are vetted by peers facing the same risks. 
  • Evaluate vendor security controls and benchmark them against industry standards.
  • Make clear, actionable recommendations if you identify control issues; make sure your communication is targeted, practical, and well documented. 
  • Develop consistent vendor assessment reporting, including executive summaries 
  • Create procedures for ongoing risk monitoring and management, remediation, and business continuity 
  • Determine a schedule for regular re-assessments based on existing risk factors or changing business conditions.

4. Data and technology
Insurance companies run on data, and TPRM data is another essential source of insight. Depending on the organization, strategic investment in data-management and TPRM software can create centralization for easier collaboration, richer data analysis for decision-making, and automation for efficiency. When evaluating software, consider:

  • Solutions with a wide range of tools, including industry-focused compliance tracking, vendor onboarding support, assessment workflows, and robust reporting
  • Integration with existing tools like your content management system (CMS) or customer relationship management (CRM) platform, so your TPRM program can work the way you do

Whistic is a TPRM Platform Built with the Insurance Industry in Mind

The Whistic Platform is purpose-built to tackle the risk-management challenges of insurers.

  • Whistic Assess provides access to 40+ industry-standard security frameworks to ensure you are targeting the right risks for your regulatory needs.
  • AI-powered document summarization allows you to automatically conduct an assessment of detailed reports like SOC 2 without combing through them line by line—reducing back-and-forth and allowing you to focus on the exceptions that matter.
  • Do you sell to the Insurance industry? Whistic Profile allows third parties to automate assessment responses so you can accelerate the sales cycle, build trust, and share security posture proactively to stand out from competitors. 
  • AI-powered Smart Response removes the InfoSec bottleneck by providing contextual answers to security questions (including document citations). That means sales teams are empowered to query your approved document repository, so InfoSec isn’t the sole source of truth and deals aren’t lost. Plus, Smart Response understands question intent, so even custom questionnaires are automated. 

We know that when it comes to a TPRM solution, it can’t be “one size fits all” for the Insurance industry. If you’d like to learn more about the ways the Whistic Platform can solve the unique challenges you face, schedule a hassle-free demo today.

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