Michigan Insurance Data Security Law

Applies to any licensed insurer or producer, and other persons licensed or required to be licensed, authorized, or registered, or holding or required to hold a certificate of authority under Michigan’s Insurance Code.

A licensee is exempt from certain sections if it meets any of the following requirements:

• If a licensee has fewer than 25 employees, it is exempt from Section 555;
• f a licensee is subject to and in compliance with HIPAA and corresponding regulations, it is exempt from Chapter except for Sections 559 and 561;
• An employee, agent, representative, or designee of a licensee, who is also a licensee, is exempt from section 555 and does not need to develop its own information security program to the extent that the employee, agent, representative, or designee is covered by the information security program of the other licensee.

Does not apply to a purchasing group or a risk retention group chartered and licensed in a state other than this state or a person that is acting as an assuming insurer that is domiciled in another state or jurisdiction.

• is based on the subject entity’s risk assessment;
• contains administrative, technical, and physical safeguards; and
• is commensurate with the size and complexity of the subject entity, the nature and scope of the subject entity’s activities including its use of third-party service providers, and the sensitivity of nonpublic information used by the subject entity or in the subject entity’s possession, custody, or control.

A “Cybersecurity Event” means an event that results in unauthorized access to and acquisition of, or disruption or misuse of, an information system or nonpublic information stored on an information system.

Cybersecurity event does not include either of the following:

• The unauthorized acquisition of encrypted nonpublic information if the encryption, process, or key is not also acquired, released, or used without authorization.
• Certain good faith access or acquisition of data.

“Nonpublic information” means electronic information that is not publicly available information and is any of the following:

• Business-related information of a licensee, the tampering with which, or unauthorized disclosure, access, or use of which, would cause a material adverse impact to the business, operations, or security of the licensee.
• Any information concerning a consumer which because of name, number, personal mark, or other identifier can be used to identify a consumer, in combination with any one or more of the following data elements:
  • Social Security number;
  • Driver’s license number or nondriver identification card number;
  • Financial account number or credit or debit card number;
  • Any security code, access code, or password that would permit access to a consumer’s financial account; or
  • Biometric records.

Written Information Security Plan requirements:

• Protect the security and confidentiality of nonpublic information and the security of the information system;
• Protect against any threats or hazards to the security or integrity of nonpublic information and the information system;
• Protect against unauthorized access to or use of nonpublic information and minimize the likelihood of harm to any consumer; and
• Maintain policies and procedures for the secure disposal on a periodic basis of any nonpublic information that is no longer necessary for business operations or for other legitimate business purposes.

Risk Assessment requirements:

• Designate one or more employees, an affiliate, or an outside vendor to act on behalf of the subject entity that is responsible for the information security program;
• dentify reasonably foreseeable internal or external threats that could result in unauthorized access, transmission, disclosure, misuse, alteration, or destruction of nonpublic information, including the security of information
• systems and nonpublic information that are accessible to or held by third-party service providers;
•  Assess the likelihood and potential damage of these threats, taking into consideration the sensitivity of the nonpublic information;
• Assess the sufficiency of policies, procedures, information systems, and other safeguards in place to manage these threats, including consideration of threats in each relevant area of the subject entity’s operations, including all of the following:
  • Employee training and management;
  • Information systems, including network and software design, as well as information classification, governance, processing, storage, transmission, and disposal; and
  • Detecting, preventing, and responding to attacks, intrusions, or other systems failures.
• Implement information safeguards to manage the threats identified in its ongoing assessment, and, no less than annually, assess the effectiveness of the safeguards' key controls, systems, and procedures.

Based on the risk assessment, a subject entity must:

• Design an information security program to mitigate the identified risks, commensurate with the size and complexity of the subject entity, the nature and scope of the subject entity’s activities, including its use of third-party service providers and the sensitivity of the nonpublic information used by the subject entity or in the subject entity’s possession, custody, or control;
• Implement the following security measures that the subject entity determines are appropriate:
  • Place access controls on information systems, including controls to authenticate and permit access only to authorized individuals to protect against the unauthorized acquisition of nonpublic information;
  • Identify and manage the data, personnel, devices, systems, and  facilities that enable the organization to achieve business purposes in accordance with their relative importance to business objectives and the organization’s risk strategy;
  • Restrict physical access to nonpublic information to authorized individuals;
  • Protect 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;
  • Adopt secure development practices for in-house developed applications used by the subject entity and procedures for evaluating, assessing, or testing the security of externally developed applications used by the subject entity;
  • Modify the information system in accordance with the subject entity’s information security program;
  • Use effective controls, which may include multifactor authentication procedures, for employees accessing nonpublic information;
  • Regularly test and monitor systems and procedures to detect actual and attempted attacks on or intrusions into information systems;
  • Include audit trails within the information security program designed to detect and respond to cybersecurity events and designed to reconstruct material financial transactions sufficient to support normal operations and obligations of the subject entity;
• Implement measures to protect against destruction, loss, or damage of nonpublic information due to environmental hazards, such as fire and water damage or other catastrophes or technological failures;
  • Develop, implement, and maintain procedures for the secure disposal of nonpublic information in any format;
  • Include cybersecurity risks in the subject entity’s enterprise risk management process.
  • Stay informed regarding emerging threats or vulnerabilities;
  • Use reasonable security measures when sharing information relative to the character of the sharing and the type of information shared; and
  • Provide its personnel with cybersecurity awareness training that reflects current risks identified by the subject entity in the risk assessment.
• And monitor, evaluate, and adjust, as appropriate, the information security program consistent with any relevant changes in technology, the sensitivity of its nonpublic information, internal or external threats to information, and the subject entity’s own changing business arrangements, such as mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and changes to information systems.

Incident Response Plan requirements:
A subject entity must establish a written incident response plan designed to promptly respond to, and recover from, any cybersecurity event that compromises the confidentiality, integrity, or availability of nonpublic information in its possession, the subject entity’s information systems, or the continuing functionality of any aspect of the subject entity’s business or operations.
The Incident Response Plan must address:

• The internal process for responding to a cybersecurity event;
• The goals of the incident response plan;
• The definition of clear roles, responsibilities, and levels of decision- making authority;
• External and internal communications and information sharing;
• Identification of requirements for the remediation of any identified weaknesses in information systems and associated controls;
• Documentation and reporting regarding cybersecurity events and related incident response activities; and
• The evaluation and revision of the incident response plan, as necessary, following a cybersecurity event.

Regarding third-party service providers, a subject entity must:

• Exercise due diligence in selecting a third-party service provider; and
• Require third-party service providers 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.

If a subject entity has a board of directors, the board or an appropriate committee of the board shall, at a minimum:

• Require the subject entity’s executive management or its delegates to develop, implement, and maintain the subject entity's information security program.
• Require the subject entity's executive management or its delegates to report in writing, at least annually, all of the following information:
  • The overall status of the information security program and the subject entity's compliance with this chapter.
  • Material matters related to the information security program, addressing issues such as risk assessment, risk management and control decisions, results of testing, cybersecurity events or violations, and management's responses to the material matters described in this subparagraph, and recommendations for changes in the information security program.
  • If executive management delegates any of its responsibilities under this section, it shall oversee the development, implementation, and maintenance of the subject entity's information security program prepared by a delegate and shall receive a report from the delegate complying with the requirements of the report to the board of directors.

• Michigan is the subject entity's state of domicile, for an insurer, or this state is the subject entity's home state, for an insurance producer, and the cybersecurity event has a reasonable likelihood of materially harming either of the following:
  • A consumer residing in Michigan; or
  • Any material part of a normal operation of the subject entity.
• The subject entity reasonably believes that the nonpublic information involved is of 250 or more Michigan consumers and is either of the following:
  • A cybersecurity event impacting the licensee of which notice is required to be provided to any government body, self-regulatory agency, or other supervisory body under any state or federal law; or
  • The cybersecurity event has a reasonable likelihood of materially harming either of the following:
    • A consumer residing in Michigan; or
    • Any material part of a normal operation of the subject entity.