Business insurance for companies using generative artificial intelligence (AI) is a critical consideration. Generative AI has the potential to transform how businesses create content, analyse information, engage with customers, and streamline operations. However, it can also expose businesses to new risks and liabilities that traditional insurance policies may not cover.

Businesses utilising generative AI should understand how it can affect their risk profile and what coverage options are available to them.

Understanding the Risks of Generative AI

Businesses should be aware that while generative AI can provide a range of benefits, it can also introduce new risks and exposures. For example, employees could accidentally enter confidential information into an AI platform, potentially compromising vital business information.

In addition, businesses may face exposure from the use of generative AI, including the potential for misinformation, intellectual property disputes, cyber-attacks, and regulatory issues. If an AI model causes financial losses to another party, that business may face potential litigation.

business insuranceAs generative AI can intersect with many aspects of a business, organisations must evaluate how their can protect them.

Cyber Risks and Data Protection

One of the primary concerns for businesses utilising generative AI is cybersecurity. AI platforms process vast amounts of information, including documents, customer data, reports, and other sensitive information. A business may incur significant expenses if confidential information is leaked through an AI platform.

Cyber insurance can help protect businesses by covering some of the costs associated with investigating and responding to a cyber incident, depending on the policy terms.

As such, businesses should consider whether their business insurance policy covers cyber risks related to the use of generative AI.

Intellectual Property and Copyright

Generative AI can produce text, images, videos, computer code, and other content. However, there are still questions about intellectual property ownership, copyright, and other legal matters surrounding AI-generated content. A company could face a copyright or intellectual property claim if an AI-generated creation is believed to violate another party’s rights.

Businesses utilising generative AI should establish internal guidelines for employees to follow when using AI platforms to create content. In addition, businesses should ensure that their professional liability, errors and omissions, or other insurance policies provide sufficient coverage for potential copyright and intellectual property claims.

Professional Liability and AI Errors

Generative AI does not always produce accurate information. For example, an AI model may provide false, misleading, or out-of-date information or contain errors. If employees use generative AI to complete professional services for another organisation, the providing business may incur liability if the client suffers financial losses due to the AI’s mistakes.

For example, a consultancy could use AI to prepare a report for a client that contains erroneous information, causing the client to suffer financial losses. The consultancy may then be liable to the client and required to pay damages. Professional indemnity insurance can protect businesses that offer professional services from financial losses due to professional negligence, errors, or mistakes, depending on the policy terms.

Businesses should carefully review their professional liability insurance policy wording, including any exclusions, to ensure that AI-related errors and omissions are covered.

Business Interruption and Generative AI

Generative AI can become deeply embedded in a company’s operations. Businesses can use AI for marketing, customer service, administrative functions, software development, and research and development. As such, businesses may suffer losses due to business interruption if an AI system fails or is the victim of a cyber-attack. Business interruption insurance can help organisations recover lost income and additional expenses due to an interruption in business operations due to an insured event.

Businesses must ensure that their business interruption insurance policy covers losses related to AI use and determine which AI applications are essential to their operations. Companies must also have contingency plans in place to ensure operations can continue if an AI platform is unavailable.

Creating an AI Risk Management Policy

Insurance should be part of a broader risk management strategy for businesses utilising generative AI. Companies should implement internal safeguards, such as guidelines for employees on using AI platforms and ensuring that sensitive information is not input into AI systems.

In addition, businesses should provide training for employees on using AI responsibly and ensure that they understand the risks and limitations of the technology. Businesses can reduce the likelihood of an incident occurring by implementing these risk management strategies, thereby reducing potential claims against their business insurance policies.

Review Your Insurance as AI Use Evolves

Businesses should review their business insurance as their use of AI evolves. Companies may adopt new AI platforms, utilise AI in new ways, or connect AI systems to their databases and customer information. As such, an organisation’s risk profile can change over time, and businesses must ensure their insurance provides sufficient coverage.

When reviewing business insurance, organisations should consider cyber liability, professional indemnity, property, business interruption, public liability, and other policies. Businesses should also consult with their insurance broker when considering new AI initiatives rather than assuming that their current insurance will provide coverage.

The Future of Business Insurance and Generative AI

Generative AI is likely to become a ubiquitous part of the business world. As such, businesses and insurers must understand the risks and exposures associated with AI and how insurance can help manage them.

Companies that utilise generative AI must consider how it affects their business insurance, including cyber liability, intellectual property, professional liability, privacy, and business interruption. By understanding these risks, businesses can ensure that they are taking advantage of the benefits of AI while also protecting their operations and finances.

Business insurance should be considered an essential element of a company’s risk management strategy for managing generative AI. By combining appropriate insurance coverage, employee training, cybersecurity safeguards, and other risk management strategies, businesses can utilise AI while mitigating potential risks and losses.

Business Insurance for Companies Using Generative AI

Business insurance should be considered an essential element of a company’s risk management strategy for managing generative AI.