What is SOC 2® and Why It Matters in Workers’ Compensation Insurance

True Breakdown is your guide to understanding complex topics that matter in workers’ compensation insurance.

Data security and compliance have become central concerns in modern insurance operations. These issues are no longer confined to IT departments—they directly impact trust, regulatory compliance, and the overall success of your organization. For companies handling sensitive policyholder and claims data, undergoing a SOC 2® examination is a key requirement for operational reliability and peace of mind.

Understanding SOC 2 Examinations

System and Organization Controls (SOC) is a rigorous auditing standard developed by the American Institute of Certified Public Accountants (AICPA). Designed specifically for service organizations handling sensitive customer data, a SOC 2 examination assesses the design and effectiveness of an organization’s controls against five Trust Services Criteria:

• Security
• Availability
• Processing Integrity
• Confidentiality
• Privacy

There are two types of SOC 2 reports:

• Type I assesses the design of controls at a specific point in time.
• Type II evaluates the operational effectiveness of those controls over a defined period, usually several months.

Why SOC 2 Matters in Workers’ Compensation Insurance

The workers’ comp industry is undergoing a massive transformation driven by technology, automation, and an increasing volume of sensitive data. Insurers must ensure that every third-party partner adheres to strict data protection protocols.

Here’s why a SOC 2 report is important:

1. Protecting Sensitive Personal and Medical Information
   Workers’ comp organizations manage data that includes social security numbers, injury details, medical records, payroll data, and more. A SOC 2 report provides independent assurance that your technology partner has the right safeguards in place to protect this sensitive information.
2. Ensuring Regulatory Compliance
   State and federal regulations require stringent data privacy and breach notification protocols. Controls evaluated during a SOC 2 examination can support your tech partner’s operational readiness and help reduce exposure to legal and financial risk.
3. Mitigating Cybersecurity Risk
   Insurance organizations are increasingly targeted by cyber threats. A SOC 2 Type II report reflects that your partner’s controls were tested over time and are operating effectively to manage and respond to incidents.
4. Building Trust with Clients and Partners
   A SOC 2 report acts as an independent validation of a vendor’s commitments to security. For customers, board members, and potential partners, it is a trust signal and a differentiator.
5. Enabling Scalable Growth
   Controls aligned with the SOC 2 framework support predictable, scalable operations. As your business grows, you want confidence that your vendors can scale with you—securely.

How True Supports Secure, Compliant Operations

What to Look for in a SOC 2-Examined Partner

When evaluating vendors, particularly those in policy administration, claims systems, or self-service portals, here are key factors to assess:

• Do they undergo regular SOC 2 examinations?
• Are they transparent about subservice providers (e.g., cloud hosting vendors)?
• Are their policies proactive or reactive?
• Do they enforce access controls and employee security training?

Why a SOC 2 Report Signals Long-Term Value

A SOC 2 examination is a foundational step toward operational excellence in the workers’ comp industry. As technology becomes more embedded in daily workflows, having independently examined, well-documented controls in place is critical for meeting regulatory expectations, maintaining client trust, and supporting sustainable growth.

At True, we take that responsibility seriously.

Want to know how our SOC 2-examined solutions can safeguard your operations? Contact Ryan Smith, Senior Solutions Advisor, or schedule a discovery call now.