SOC 2 Type 2? What Insurance Carriers Need to Know (and how SortSpoke gets it right)

The Rising Stakes of Vendor Risk in Insurance

Every submission that flows through your underwriting workflow contains a goldmine of sensitive data: financial statements, personally identifiable information, loss histories, medical records for life and health submissions, and detailed property valuations. When you hand that data to a vendor for intelligent document processing or submission triage, you're not just outsourcing a task—you're extending your data security perimeter.

State insurance regulators aren't taking this lightly. Departments of Insurance across the country are asking carriers pointed questions during examinations: "What security standards do your technology vendors meet?" High-profile data breaches in the insurance sector have made headlines, with compromised vendor systems serving as the entry point in several notable incidents.

The result? Carrier CIOs and CISOs now routinely require SOC 2 reports before approving any vendor that touches submission data. It's become table stakes for procurement. But here's what many carriers miss: not all SOC 2 certifications are created equal.

SOC 2 Type 1 vs Type 2: What Insurance Carriers Need to Know

Understanding the difference between SOC 2 Type 1 and Type 2 certifications is critical when evaluating vendors.

SOC 2 Type 1 provides a point-in-time snapshot—essentially a one-day audit that tests whether security controls exist. Think of it as checking if a vendor has installed locks on their doors. It confirms the controls are designed properly, but it doesn't tell you if those locks actually work day-to-day, or if anyone bothers using them.

SOC 2 Type 2 is far more rigorous. It tests those same controls over a 6-12 month period, proving they work consistently over time. The auditor examines whether controls operated effectively throughout the audit period, identifies any control failures, and reviews how those failures were remediated. Type 2 certification requires ongoing operational discipline, not just good intentions.

For insurance carriers, this distinction matters enormously. Automated submission processing happens 24/7/365—you need ongoing security, not just a snapshot from the day an auditor visited. Type 2 reveals whether a vendor's security posture deteriorated after their initial certification, something Type 1 can't show you.

This is why enterprise insurance clients increasingly specify SOC 2 Type 2 certification in their vendor contracts. They've learned that Type 1 creates a false sense of security. If you're evaluating vendors for mission-critical functions like data security for insurance operations, Type 2 should be your baseline requirement.

The Vertafore team puts it well in their guide to SOC 2 compliance in insurance: Type 2 demonstrates that security isn't just documented, it's practiced.

What to Look For in a Vendor's SOC 2 Report

Receiving a SOC 2 report isn't enough—you need to know what questions to ask. Here's what matters when evaluating a vendor's certification:

Which Trust Service Criteria are included?

SOC 2 reports can cover five Trust Service Criteria: Security, Availability, Confidentiality, Processing Integrity, and Privacy. At minimum, any vendor handling insurance data should have Security covered. Ideally, look for Security + Availability + Confidentiality.

If a vendor has excluded certain criteria, ask why. Sometimes it's legitimate (a software vendor might not need Privacy if they don't process PII), but other times it reveals gaps. For vendors processing insurance submissions—which absolutely contain confidential and private data—all three criteria should be in scope.

What's the audit period?

The standard for SOC 2 Type 2 is a minimum 6-month audit period, though 12 months is increasingly common. Be wary of vendors with very short audit periods or those who recently upgraded from Type 1 to Type 2—they haven't proven sustained compliance yet.

Were there any exceptions or control failures?

Here's a secret: virtually all SOC 2 reports include some exceptions. Auditors test dozens of controls, and it's rare for everything to be perfect. What matters is how the vendor responded. Did they have a plan to remediate? Were fixes implemented promptly? Is there a pattern of the same issues appearing repeatedly?

Ask your vendor directly: "What exceptions were found in your most recent SOC 2 audit, and how did you address them?" A vendor willing to discuss this transparently demonstrates security maturity. One who dodges the question? Red flag.

Who was the auditor?

SOC 2 audits should be performed by reputable CPA firms—either the Big Four (Deloitte, EY, PwC, KPMG) or specialized SOC 2 auditors working with platforms like Secureframe or Vanta. Unknown or non-accredited auditors are a red flag.

Is the report current?

SOC 2 Type 2 certifications should be renewed annually. If a vendor's report is older than 12-15 months, their current security posture is a question mark. Annual audits demonstrate ongoing commitment, not a one-time compliance sprint.

How SortSpoke Implements SOC 2 Type 2 for Insurance

At SortSpoke, we designed our SOC 2 compliance program specifically around the unique requirements of insurance submission processing.

Our Certification Scope covers all three critical Trust Service Criteria: Security, Availability, and Confidentiality. We didn't cherry-pick the easy ones—we committed to the full scope that insurance carriers need.

Controls Built for Insurance Workflows

Generic document processing vendors often bolt security onto existing systems. We built it in from day one, with controls specifically designed for insurance data:

• Role-Based Access Control: Underwriters only see submissions they're authorized to access. No one gets blanket access to all carrier data.
• Comprehensive Audit Trails: Every document view, AI extraction, and manual edit is logged with timestamps and user IDs. If a regulator asks "who touched this submission?" you have an answer.
• Data Isolation: Each carrier's data is cryptographically separated. Even our own engineers can't access production submission data without multi-party authorization.
• API Security: Integrations with carrier systems use OAuth 2.0, API key rotation, and encrypted data transmission. We treat API connections to your underwriting systems with the same rigor you do.
• AI Model Controls: Our human-in-the-loop AI approach extends to model security. Training data is separated from production data, and model updates go through change management processes audited under SOC 2.

This matters because unlike generic SaaS vendors, we're handling the most sensitive documents in your underwriting workflow—ACORD forms with policyholder data, loss runs with claims history, medical records in life and health submissions, and financial statements with proprietary business information. Our SOC 2 controls reflect those specific risks.

For complete technical details on how these controls work in practice, see our SOC 2 compliance page.

Beyond Compliance: What SOC 2 Reveals About a Vendor

The real value of SOC 2 Type 2 certification isn't the report itself—it's what that certification reveals about a vendor's organizational DNA.

Security Culture

Does the vendor treat security as a core engineering priority, or is it an afterthought driven by sales requirements? Type 2 audits reveal this through documentation of security practices, incident response procedures, and how security is embedded in the software development lifecycle.

Operational Excellence

Can the vendor consistently execute security controls over time? Type 2 tests this explicitly. A vendor might have perfect controls on paper (Type 1), but Type 2 shows whether they actually follow them when it's 2am and a production issue needs fixing.

Incident Response

How does the vendor handle security events and control failures? The exceptions section of a SOC 2 report is actually the most telling part—it shows you how they respond when things go wrong, which is when security really matters.

Transparency

A vendor's willingness to share their SOC 2 report and explain findings openly tells you a lot. Security-mature companies treat SOC 2 as a point of pride. Those treating it as a checkbox to unlock sales? That's a different story.

How to Request and Review a SOC 2 Report

Make SOC 2 review a standard part of your vendor evaluation process:

Protecting Your Underwriting Data Starts with Vendor Standards

As insurance carriers increasingly rely on AI and automation for submission processing, SOC 2 Type 2 certification has become non-negotiable for vendor selection. It's not just about compliance—it's about ensuring your underwriting data, customer PII, and carrier workflows are protected by vendors who take security seriously every single day, not just when auditors are watching.

SOC 2 Type 2 demonstrates that a vendor has moved beyond security theater to operational security discipline. When you're evaluating vendors for mission-critical functions like intelligent document processing, this distinction matters.

SortSpoke's SOC 2 Type 2 certification demonstrates our commitment to meeting the highest security standards for insurance carriers. To learn more about our certification journey and what it means for our customers, read about how SortSpoke achieved SOC 2 compliance.