Generative AI is a processing tool built on deep machine learning that can digest colossal amounts of data. It can synthesize, translate, analyze and summarize dense information in a human tone. Its responses and interactions may seem human, but it’s programmed that way.
For all of AI’s perks, there are just as many risks. Practical questions remain: How can AI help your business and how do you ensure the risks?
AI implementation considerations
While it’s true that AI can be resource-intensive at the outset, it could offer long-term advantages if you appropriately implement it. Implementation requires a lot of planning, including addressing cybersecurity, intellectual property and data privacy concerns. Using AI could also impact job roles.
Make a plan to navigate these changes. Adopt policies around AI and be transparent about how you intend to use it in your operations.
AI tools require a layered approach to risk mitigation
There isn’t a specific type of insurance for AI liability yet. But you can insure against the evolving AI risks using layers of insurance, including the following:
| Insurance | The liability it covers |
| Cyber liability or data breach insurance | This covers legal fees and expenses associated with cybercrime. For example, cyber liability insurance will help pay for network restoration and required personal identity monitoring if a cyberattack exposes personal data. Any business that uses an internet-connected computer or device needs this insurance. |
| Technology errors and omissions (E&O) insurance | This covers software developers and technology consultants for negligence, mistakes, or failure in their professional duties. If you recommend AI products or work in the technology field, this coverage is for you. |
| Intellectual property insurance | This covers litigation expenses for lawsuits involving intellectual property infringement. It is essential coverage since generative AI can output content that infringes on others’ intellectual property. |
| Media liability insurance |
This covers allegations that your content harmed someone financially or caused them emotional distress. Claims could involve copyright infringement, vicarious infringement or defamation. Consider a policy if you’re using AI chatbots to generate content online or interact with the public. Your AI tool could malfunction or get hacked and generate harmful content, which you’d be liable for. You could also be vicariously liable for the content of your paid influencers, including copyright infringement. That’s even if you had nothing to do with creating it. |
| General liability insurance | This covers legal fees and payments resulting from physical harm. For example, if a robot or AI-powered machine you operate causes an accident, your general liability insurance will respond. |
| Directors and officers (D&O) insurance | This covers your management team if you get sued. D&O coverage helps with legal fees and settlement costs. It is essential if you serve on a board outside of your business. Board members, directors and officers can be held personally liable for injuries and damages. |
| Professional liability insurance | This protects your business against claims of inadequate work or negligent actions. It’s also known as errors and omissions (E&O) insurance. |
| Employment practices liability insurance (EPLI) |
This coverage is for when an employee sues you. General liability won’t cover you for lawsuits related to employee complaints. General liability covers third-party claims, like ones made by customers or the public. EPLI covers you when an employee sues you for things like:
For example, you’re at risk if you use AI to sift resumes, create knowledge and skill assessments, check references, and conduct interviews with face and voice analysis. You could be sued for violating federal antidiscrimination laws if you don’t use robust supervision and testing protocols for your AI tool. |
| Supply chain liability insurance |
This protects your company against financial losses caused by disruptions in the supply chain due to natural disasters, political unrest, logistical errors, supplier insolvency or cyberattacks. If you or one of your vendors uses AI, you could experience losses because of inaccurate predictions, automation errors or system outages. This could result in lost orders or reputational damage. Look for third-party coverage to protect against losses caused by providers in your supply chain. It can help with claims made against you for supply chain issues, like late deliveries, product defects or noncompliance with regulations. |
| Employee theft or crime insurance | This covers you for insider threats like employee theft. Most policies don’t cover losses when an employee is involved. Add employee theft to your policies to safeguard against internal corruption. |
Your vendors’ AI could expose you to risk
Even if you don’t use AI directly, your supply chain might. Take time to understand how your vendors use AI, and their ability and willingness to take responsibility for it. Be wary of vendors that absolve themselves from all liability after implementation.
For example, say one of your vendors uses AI to place orders and send confirmations. The AI tool malfunctions and fails to place incoming orders, but it sends confirmations anyway. The resulting backlog creates a supply chain bottleneck, causing you to lose clients. Will your vendor handle the liability?
Vet your vendors for responsible use of AI
Be clear on the division of liability with your vendors. Follow the same best practices you would with any technology and use a reputable tech company. Do they offer employee training and ongoing support? Research their warranties and ask for proof of their insurance, like technology E&O coverage.
International laws have different AI regulation requirements
If you use AI across international locations, ensure your insurance and usage policies comply with local laws and regulations. Consult your lawyer before signing any business contracts or agreements, especially cross-border ones.
Bolstering your cyber liability insurance application
Cyber liability insurance can mean the difference between bankruptcy and recovery after a cyberattack.
How insurance companies evaluate cyber applications
Insurance companies will request information to assess your vulnerability to an attack so they can price the policy. The higher your risk of an attack, the higher your premium will be. They’ll also look at:
- Your data-sharing, collection and storage practices
- Your cybersecurity strategy
- Your cyber incident response plan
Be truthful about your AI use, computer information and cybersecurity protocols. If you omit or embellish a process, you risk a claim denial in the future.
Cybersecurity is crucial to your business
It can be intimidating to put your cybersecurity under scrutiny. The Cybersecurity & Infrastructure Security Agency has information to help business owners evaluate their risks and find solutions.
Stay vigilant and protect your liability
Contact a Conrade commercial coverage agent about AI initiatives at your company. And if you rely heavily on vendors, ask about third-party liability insurance. They’ll help you find insurance solutions so you can focus on making the most of your AI tools.