A conversation with Donna Stumpion, PCIA, and Rich Backer, Kamico
For our 20th episode of the Pro Concepts podcast, I brought together two people who know the CPA professional liability space as well as anyone. Donna Stumpion is one of our own here at PCIA, and she specializes in law firms and CPA firms. Rich Backer is with Kamico, which I would call the premier professional liability carrier in the United States for CPA firms, and one we've been proud to partner with for decades.
This episode is geared specifically toward accounting firms and CPA professionals. If that's you, read on. There's a lot here worth paying attention to.
1. The Corporate Transparency Act and Beneficial Ownership Information Reporting
CTA and BOI reporting have generated more questions and conversations in the last several months than just about any topic I can remember in this space, outside of the PPP chaos at the start of COVID. If you're a CPA, your clients have already been asking you about this work. The question from a professional liability standpoint is whether you're covered if something goes wrong.
Rich and his team at Kamico issued their first guidance on this back in July, and the early advice was simple: tread lightly. It's a new service category, and before jumping in, firms should be talking to their insurance agent and their program carrier to understand coverage.
The good news is that under Kamico's broad policy language, if a professional service isn't specifically excluded, it's generally covered. CTA and BOI work falls into that category. The wrinkle that gave everyone pause was the possibility that certain states might deem this work to be the practice of law. If that happened, a CPA performing those services could be in unlawful practice of law territory, which would trigger a policy exclusion. To date, no state has made that determination, so there's no coverage issue. Kamico has also committed that even if a state were to make that call in a future year, they would look back to when the service was actually provided and what the law was at that time.
That said, covered doesn't automatically mean you should do it. Every firm needs to evaluate whether they're knowledgeable enough in this area, whether it's worth the operational lift, and whether the revenue justifies updating engagement letters and tracking ongoing reporting requirements. Donna also pointed out that some carriers have already drawn a hard line and excluded this work entirely, so not all policies are equal here. Know what you have.
2. Work with an Expert Agent
This one sounds straightforward, but it matters more than people realize, and the CTA and BOI situation is a perfect illustration of why.
If you're a CPA firm and you call a general lines agent with a question about whether a new professional service is covered under your professional liability policy, there's a real chance they won't know. There's nothing wrong with general agents; they serve an important purpose. But professional liability for CPA firms is a specialty, and the nuances of policy language, coverage triggers, and exclusions require someone who actually knows the space.
An agent who specializes in your profession can answer your coverage questions, help you understand how different carriers approach your specific risks, and place you with the carrier that actually fits your needs. Rich put it well: agents get paid, so make them work for it. If they're not adding value on the professional liability side, that's worth examining.
3. Cyber Insurance
The cyber conversation is not going away, and if you're a CPA firm without cyber coverage, you are taking on real risk.
Professional services firms, including CPA firms, law firms, and architecture and engineering firms, are among the top targets for cyber attacks. The reason is straightforward: you hold an enormous amount of sensitive client data. Financial records, tax information, business details. That's exactly what bad actors are after.
Donna recently attended a half-day cyber seminar and came back with a sobering takeaway. The tools being used to infiltrate systems are cheap, accessible, and increasingly powered by AI. What used to require a human sitting at a keyboard running through combinations can now run thousands of attempts simultaneously. Donna said it best: this is less a question of if and more a question of when.
At a minimum, multifactor authentication needs to be in place. That's table stakes at this point. For smaller firms, adding a cyber endorsement to your professional liability policy may be sufficient. For midsize and larger firms, a standalone cyber policy is worth considering, as it will provide broader coverage and more resources for prevention and response.
Human error remains the leading cause of breaches. Training your staff, running phishing simulations, and having the right protocols in place are just as important as the policy itself.
4. Mergers and Acquisitions
M&A activity in the CPA space has been accelerating for years, and the pandemic pushed it further. What used to be midsize firms buying up smaller ones has evolved into large firms merging with other large firms, and private equity beginning to enter the picture. The universe of independent CPA firms is shrinking, and it's happening quickly.
From an insurance standpoint, the key issue to understand is tail coverage, also known as extended reporting period coverage. Your professional liability policy covers claims arising from work performed during the period you were insured. When a firm is acquired and the policy is canceled, you still need coverage for the services you provided before that cancellation date. Tail coverage fills that gap.
The cost can catch firms off guard. Extended reporting period coverage typically runs between one and a half to two times your final year's premium as a one-time cost. On a $10,000 annual premium, that could mean a $15,000 to $20,000 lump sum. That's a real number, and it should be part of your negotiation when you're working through the terms of a deal.
The most important piece of advice here is simple: loop in your insurance agent early. Don't wait until documents are being signed. We're happy to sign an NDA and work through the details quietly while negotiations are ongoing. Getting caught the day before closing with a coverage gap is a stressful situation that's entirely avoidable.
5. Talent Retention and Recruiting
This is one of the most pressing challenges CPA firms face right now, and it has been building for years. Fewer young people are pursuing the CPA license. Fewer students are going into public accounting. And the firms that can't find or develop next-generation talent are increasingly turning to mergers as an exit strategy, not because it's the right business decision, but because there's no one to hand the keys to.
Accounting associations are actively working to promote the profession in high schools and to shift the perception of what a career in public accounting actually looks like. It's more varied, more advisory, and more relevant to business than the traditional image suggests.
In the meantime, firms are getting creative. Some are using offshore resources for administrative and lower-complexity work. Others are bringing in non-CPA partners with technology or business backgrounds. The composition of firm leadership is going to look very different in 15 to 20 years. Some of that change is already happening.
The challenge is that the work CPAs do at its best is deeply relational. Understanding a client's business, advising on decisions, being a trusted partner through difficult moments. That's hard to replicate, and it's also what makes CPA firms valuable. Retaining the people who can do that work well is worth real investment.
6. Client Advisory Services
The role of the CPA has evolved well beyond tax preparation, and that evolution is an opportunity.
Clients are already looking to their CPAs for guidance on issues that go far beyond the traditional scope of the work. The CTA and BOI situation is a recent example, but it's part of a larger pattern. CPAs helped their clients navigate PPP loans during COVID. They're being asked to weigh in on business strategy, succession planning, technology decisions, and more. The advisory relationship is already there for many firms. The question is whether they're formalizing and getting credit for it.
There are real revenue opportunities in client advisory services, and they align naturally with what CPA firms are already doing well: understanding their clients' businesses deeply and offering guidance rooted in financial expertise. That's a strong foundation to build from.
The liability consideration is the same as it is for any new service area: make sure you understand your coverage, talk to your agent, and don't expand into areas where you don't have the knowledge or infrastructure to do the work well.
The CPA profession is navigating a genuinely complex moment. Regulatory changes, a tightening talent pipeline, consolidation, evolving client expectations, and a cyber threat environment that only grows more sophisticated. The firms that are going to come out ahead are the ones that are staying informed, working with the right advisors, and making proactive decisions rather than reactive ones.
If you have questions about your professional liability coverage or want to talk through any of the topics we covered here, reach out to our team. We work with CPA firms every day, and we're happy to help.
To reach PCIA, visit pciaonline.com or call 800-969-4441.
To learn more about Kamico, reach out to your PCIA contact or visit kamico.com.