Cyber Insurance + Cyber Compliance: What CPAs Should Know Before a Claim Happens

Cyber insurance has become one of the most discussed—and misunderstood—tools in business risk management. Many organizations still assume that purchasing a cyber policy is the final step in “handling cybersecurity.” In reality, cyber insurance is increasingly tied to cyber compliance, and a claim outcome can depend on whether the insured can demonstrate that basic security controls were in place, properly implemented, and consistently followed.

For CPAs, this shift matters for two reasons. First, CPA firms remain attractive targets because of the sensitive financial and identity data they handle. Second, CPAs are often the first trusted advisors clients turn to when they’re evaluating cyber coverage, responding to a breach, or trying to understand how cyber risk impacts the business.

Why Cyber Insurance Is Harder Now (and Why That’s Not Random)

Cyber insurance has been available for years, but early on it was a difficult product for carriers to sell. To make policies more attractive, insurers often bundled in value-added services such as incident response resources, forensic support, legal coordination, and negotiated vendor rates.

Then ransomware accelerated dramatically—especially during the COVID period—driving a surge in both the frequency and severity of claims. Many carriers experienced significant losses, and the market adjusted. Underwriting tightened, premiums increased, deductibles rose, and insurers began requiring clearer proof of baseline security controls.

Today, cyber insurance is less “easy coverage” and more a risk partnership: insurers want confidence that the insured can prevent common incidents and recover quickly when one occurs.

Cyber Insurance Applications Are Now a Controls Review

Many cyber insurance applications now function like a high-level cybersecurity audit. The questions are fairly consistent across carriers and focus on whether the organization has implemented controls that reduce the most common and expensive incidents.

These typically include:

Multi-factor authentication (MFA)
Endpoint protection (often EDR)
Patch management
Secure backups and restoration testing
Incident response planning
Vendor risk controls

The direction is clear: cyber insurance is no longer just a premium and a policy—it’s a risk relationship that expects minimum standards.

Compliance and Insurance Are Converging

“Compliance” can sound like a complicated set of standards and technical frameworks. While larger organizations may structure their cybersecurity programs around frameworks like the NIST Cybersecurity Framework, most CPA firms and small-to-mid-sized businesses don’t need to master the acronyms to improve security and reduce risk.

In practical terms, cyber compliance often comes down to a simpler question:

Are we doing the basic things a reasonable organization should do to protect sensitive data—and can we prove it?

In the middle of an incident, organizations are often asked:

Were controls in place before the incident?
Were they consistently applied?
Can you prove it?
Were insurance application answers accurate?

This is where CPA instincts matter. CPAs understand defensibility, documentation, and internal controls. Those same principles apply in cyber compliance.

The Application Problem: “Yes” Is Not Always Safe

One of the most common issues organizations face is answering cyber insurance applications inaccurately—not necessarily out of dishonesty, but out of assumptions.

Common examples include:

“We have MFA.” MFA may be enabled on some systems, but not enforced on email, remote access, or privileged accounts.
“We have backups.” Backups may exist, but they may not be isolated or tested through an actual restoration exercise.
“We do security awareness training.” Training may have been completed once, without ongoing reinforcement or phishing simulations.
“We have endpoint protection.” Antivirus may be installed, but alerts may not be monitored or centrally managed.

These gaps matter because insurers underwrite based on controls—and controls are increasingly tied to eligibility and claim handling.

Claims Are Sometimes Paid…Then Questioned

Another shift CPAs should be aware of is that cyber claims can become complicated when there is a mismatch between what was represented during underwriting and what was actually in place at the time of the incident.

In some situations, insurers have disputed coverage after the fact—or pursued recovery—when they believed key security requirements were not met. The takeaway is not that cyber insurance “won’t pay,” but that coverage disputes can arise when underwriting answers are not accurate or supportable.

A useful way to think about it is this:

Treat cyber insurance applications like financial representations—accurate, supportable, and backed by documentation.

Real-world coverage disputes have occurred when insurers believed required security controls were not maintained. In one widely discussed case involving a healthcare organization, the insurer sought a court ruling that it was not obligated to pay because minimum risk controls were not in place as required. The lesson is simple: accurate applications and defensible documentation matter.

What Happens During a Claim: Documentation Matters

When a cyber incident occurs, time moves fast. There are legal decisions, business decisions, and technical decisions happening simultaneously. In the middle of that chaos, insurers and response partners often need quick confirmation of what was in place before the incident.

This is where a simple “evidence folder” can make a meaningful difference.

A Cyber Compliance Evidence Folder Can Include:

MFA enforcement proof (email + remote access)
Backup configuration details and restore test notes
Endpoint protection/EDR deployment confirmation
Incident response plan and emergency contact list
Records of training completion and phishing testing
Vendor list and key vendor security documentation

This doesn’t need to be perfect. But it should be real, current, and accessible.

The CPA Firm Perspective: You’re Not Too Small

Many CPA firms assume they are “too small” to be targeted. Unfortunately, cyber criminals don’t think that way. They look for valuable data, weak controls, trusted access, and fast monetization opportunities. CPA firms often check all four boxes.

Cyber compliance and cyber insurance readiness are not just “IT projects”—they are operational necessities for protecting the firm and maintaining client trust.

Before a Claim Happens: Three Practical Steps

For CPA firms and clients alike, these three steps create immediate risk reduction and improve insurability:

Confirm MFA is enforced on email, remote access, and admin accounts
Perform a backup restoration test and document the result
Run a basic incident response tabletop exercise with leadership

These are practical, achievable steps that can be completed in weeks—not months.

For many CPA firms and small-to-mid-sized businesses, the most practical next step is a short cyber insurance readiness review—focused on validating a handful of key controls (such as MFA, backups, endpoint protection, and incident response readiness) and organizing supporting documentation. This type of review can reduce underwriting friction, improve confidence in application responses, and help prevent avoidable surprises if a claim ever occurs.

Final Thought: Insurance Is a Backstop—Compliance Is the Foundation

Cyber insurance can be a key component of a broader risk management strategy, but it works best when paired with strong cyber compliance practices and defensible documentation.

For CPAs, the opportunity is clear: by understanding the link between compliance and insurance, CPAs can better protect their own firms and help clients navigate cyber risk with confidence—without needing to become technical experts.

This article was submitted by Jonathan Trimble, former FBI agent and cybersecurity executive, and the co-founder of Bawn,where he helps organizations reduce cyber risk and strengthen cyber insurance readiness.