Sensitivity Label Policy Settings (Not Working as Expected)

Hi all,

I've setup a Sensitivity Label Policy with the following settings:

• Apply this label by default to documents and email.
• Users must provide justification to remove a label or lower classification label

The label assigned to the policy has the following settings:

• Encryption - Apply
• Assign permissions now sign permissions now - Assign permissions now
• User access to content expires - Never
• Allow offline access - Always
• Assign Permissions - Add all users and groups in your organisation
• Choose permission - Co-author

When I try to create a new document I'm expecting that the document will automatically have the label applied and the document will be encrypted. If the user tries to change the label, I'm guessing that a box should popup asking them to input a reason for changing the label.

What I find, is that when a new word document (web version through OneDrive portal.office.com) is created, it does not have the label applied automatically when checking the sensitivity option in the ribbon.

Can anyone please advise how I can get this working?

Thank you.