3 Ways to Know if Your Firm Needs Cyber Insurance
Small accounting firms rarely consider advanced insurance protection and instead opt for standard insurance like errors and omissions, general liability, workers’ compensation and property and contents, assuming anything more advanced is optional.
But as your business expands, it becomes more and more important to think about how you would serve your growing clients base if the worst were to happen. And in a modern technology landscape, the worst often involves a digital threat to the most important asset your accounting firm has: your data and that of your clients.
Cyber insurance, also known as cyber liability insurance coverage or cyber risk insurance, helps offset costs involved with recovering from a cyber attack or security breach. It of course doesn’t prevent cyber attacks, but it can significantly offset the risk of a breach by underwriting reimbursable expenses like:
- privacy notifications
- lawsuits and extortion
- business losses from network downtime
- data loss recover
- crisis management
Cyber insurance first appeared on the market in the late 1990s and early 2000s. However, it’s only in the past few years that it’s become a common insurance policy for businesses that collect and store data.
Roughly 33 percent of companies in the United States purchase some type of cyber insurance. In fact, cyber insurance is quickly becoming a default insurance option for companies that store any kind of data online.
Curious about whether or not your firm needs cyber insurance? Here’s a look at three reasons more accountants, tax preparers and bookkeepers than ever are considering this coverage:
1. Cyber attacks are on the rise
Despite companies consistently putting more sophisticated security measures in place, there’s still a consistent year-over-year increase in cyber attacks. Symantec’s 2018 Internet Security Threat Report cites increases in IoT attacks (600 percent), cryptojacking (8,500 percent), malware exploits (200 percent) and mobile malware variants (54 percent).
With the increasing volume and diversity of cyber threats, it’s more likely than ever that a business will experience a breach at some point. Cyber insurance mitigates the financial risk of an attack by helping your firm recoup lost productivity, as well as the active costs of notifying clients of a breach and recovering your data.
2. Even small breaches are costly
The typical ransom amount demanded from cyber attacks aren’t especially large – the worldwide average in the second quarter of 2017 was $500-$2,000. But it’s not the ransom that threatens your firm’s financial status; it’s the cost of lost time and additional effort to recover from the attack.
A firm that grosses $5 million a year is worth about $2,400 per work hour. Even if your firm opts to pay the ransom quickly, it can take hackers up to 48 hours to verify your payment, leaving your firm struggling to recover from a $44,000 disruption. The costs – both to your daily productivity and reputation – add up.
3. Pairing cyber insurance with proactive security measures provides true security
Cyber insurance alone can’t save your firm from costly attacks. It’s simply an important way to protect your company from the after-effects of a breach you hope will never come.
Since the best insurance is insurance you never have to use, the bulk of your attention should fall on building and maintaining a secure private cloud that limits the opportunities for hackers to gain access to your systems. Pairing cyber insurance with this kind of holistic, preventative data security is the best way to make sure you’re protecting your accounting firm from every angle.
As hackers and cyber attacks become increasingly sophisticated, it’s no surprise accounting firms have stopped asking, “Do we need cyber insurance?” and started asking, “How much cyber insurance do we need?” If you haven’t thought through your firm’s needs to pair a private cloud with cyber insurance, there’s no better time than now.
|We're proud to present the Technology Strategy series in association with AbacusNext who share our commitment to helping firms adjust to the digital world as safely as possible. AbacusNext provides a suite of best of breed services to accountants including OfficeTools Practice Management, Results CRM, and Abacus Private Cloud.|
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Tomas Suros is a lawyer and technology advocate working at the intersection of law, IT, and client consulting. With AbacusNext since 2004, he currently serves as Chief Solutions Architect, guiding firms through the process of identifying forward facing technology options and ensuring the successful implementation of a tailored solution.