@Go believe , For the setting, it generically checks for the presence of encryption on the device, more specifically at the OS drive level. Currently, Intune supports only the encryption check with BitLocker. In addition, the setting “Require encryption of data storage on device” does not require a reboot to evaluate Bitlocker compliance. However, the devices are not evaluated as compliant until the drive is fully encrypted. Here is a link with more details:
https://learn.microsoft.com/en-us/mem/intune/protect/compliance-policy-create-windows#encryption
Hope it can help.
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