Cyber security is currently one of the emerging issues worldwide across most sectors from IT, healthcare, education, governments, transport, to Finance. When the Covid-19 pandemic hit the globe, it profoundly triggered significant changes. Some of them included increased cyber attacks and data breaches by 51% compared to 2019. As of 2020, it was estimated that cyber crime caused a loss of about $1 trillion globally, and ransomware attacks on US businesses cost $20.9 billion, whereby service-based businesses were most targeted.
Do accountants really need cyber insurance?
Yes, cyber security insurance is necessary for accountants/ CPAs since they collect, store, and handle confidential yet vital data such as bank account details, client payments, invoices, credit card information, social security number, etc. Keep reading down here as we explore more about cyber insurance regarding accountants.
What is a Cyber Insurance Anyway?
It’s an insurance policy that covers/protects your business against cyber risks, IT infrastructure/ activities, or internet-based risks such as data breaching, social engineering, malware, etc. Additionally, cyber insurance may cover the recovery of compromised data, repairing damaged computer systems, and restoration of the personal identities of the affected customers.
This insurance is also referred to as cyber-liability insurance. It’s a type of small business insurance that business owners, including CPAs, should consider protecting their business against things such as financial or data losses linked to cybercrimes.
Reasons why Accountants/ CPAs need Cyber Insurance.
As you can tell from the above outline, there is a vast need for cyber security in various areas, including accounting, due to increased cyber threats. One of the proactive measures to hire competent IT and cyber security experts is getting a cyber insurance policy. It’s regardless of the size of your business or the experience of your accountants. Below are the reasons every accountant/ CPA firm needs cyber insurance.
- Risk of Malware
Malware is one of the top cyberthreats targeting accountants and accounting firms. Malware is simply malicious software, i.e., it’s designed with the intent to gain unauthorized access, disrupt or damage devices and their systems. It’s one of the greatest threats on the internet, and accountants are not immune to malware attacks. Examples of malware include viruses, ransomware, spyware, Trojan horse, etc. A scenario of cyber attacks (specifically malware attacks) an accountant is likely to experience include:
- Unauthorized restriction to access software, networks, data, or clients’ files until a ransom is paid. Basically, the attacker may encrypt an accountant’s or CPA firm’s data with the aim of blocking access.
- An accountant may download and execute a file, program, or software that looks legit (Trojan horse) into their computer. It starts creating numerous attacks on your computer and its data. Such files can be attached from the email you receive or websites you visit.
An example of a ransomware attack was experienced in April 2020 by one of the leading Canadian accounting firms, MNP, whose operations were shut down the entire week.
A cyber insurance policy is among the vital investments an accountant or CPA should have to mitigate risks and losses associated with increased malware attacks.
- Data Theft and Breaching is on Rising
Due to a trend in increasing cyber crimes, clients in the financial sector are now concerned about the safety of their information. According to a survey conducted by the Harris Poll on behalf of the American Institute of CPAs (AICPA), nearly 89% of Americans are highly concerned about the ability of businesses to safeguard their personal and financial information. Data theft and breaching is a big concern, and it’s alarming in the accounting field.
A data breach will cost a significant amount of money and can easily harm your reputation as an accountant. It’s estimated that each record lost through data breaching costs approximately $150 on average globally. How much would it cost you as an accountant or CPA due to data breaching? Worst of all, customers would stop working with you, and some would even seek legal assistance against you.
But how can you counter this issue as an accountant? Proper cyber security training is essential for CPAs. Most importantly, subscribing to a cyber insurance cover is a viable choice that protects you from data loss and breaching. Remember, hackers are smart and execute different tactics to steal data or breach systems, and no one is entirely immune to this kind of issue, not even the giant companies around the world. Why don’t you protect yourself before you or your CPA firm becomes a target?
- Phishing Schemes are Increasing
Phishing attacks are among the top cyber-threats affecting accountants/ CPA firms. It entails cybercriminals or hackers using fake communication that appears real-like in websites, emails, phone calls, or texts to manipulate an accountant to click on certain links or attachments that are often infected with malware.
Usually, phishing involves a little yet impactful play into human emotions to click on the above-stated information. It’s a social engineering technique. The common phishing scams accountants face are fake domain invoices, bogus copyright infringement claims, and email upgrade scams.
As a result, the attacker ends up harvesting your clients’ information and business data, which they can later use to encrypt your file with ransomware, access your client’s personal accounts, file fraudulent tax returns, etc.
It’s another reason you need cyber insurance. Insurance companies also have cyber security specialists who assist in protecting you against phishing attacks. Lastly, it offers your extra resources to cover liability following such cyber attacks.
An example of a phishing attack in the accounting field occurred in 2020 whereby an unauthorized third party attacked CPA Canada, and some of the data was compromised. This incident affected over 329,000 members (accountants) and stakeholders of association.
- Increased Regulatory Demands
Due to increased cyber security threats and vulnerability to various industries such as healthcare, legal, small businesses, education, utility companies, and government agencies, cyber regulatory demands are increasing all over the world. In fact, the financial industry is one of the most at-risk industries for cyberattacks.
Most big and small businesses pay more attention to general liability and property insurance policies. However, things are changing, and getting cyber security insurance is becoming a priority in the financial sector. Above all, the authorities and relevant agencies are encouraging accountants/ CPA firms to get cyber insurance coverage due to the new risks and changing business circumstances.
For instance, CPA Canada recommends any independent or firm providing accounting services to protect their businesses and clients with commercial general liability insurance and cyber liability insurance.
Another instance that triggered regulatory demands concerning cyber insurance for accountants is the NYCRR 500 guidelines by New York State, Department of Financial Services. Also, the General Data Protection Regulation (GDPR) by European Union has set strict privacy and security guidelines for organizations or individuals targeting and collecting people’s data in the EU.
Final Thought
In the current world, there are a lot of technological advancements, and so are the cyber threats and risks. Accountants and CPA firms are significantly involved in the financial industry, which has seen a lot of automation, among other advancements. Also, they handle and deal with a lot of essential data of their respective clients.
On the other hand, cybercriminals are targeting to attack accountants in different ways, such as phishing schemes, data breaching, malware, data theft.
However, cyber insurance or so-called cyber liability insurance is one of the significant covers an accountant/ CPA firms should have as a strategy to deal with possible cyber risks in their operations. Most businesses operating in the modern digital environment, including accounting, are prone to the risk of cyber attack(s).
At Mindaro, we are working hard to address all the needs of small businesses security by partnering with top tear carriers, providing low cost, easy and understandable insurance policies that will help protect a businesses from major risks out there. For more information, please visit us at mindaro.io