Artificial Intelligence is Gaining Traction in the Workplace, but it has Drawbacks. Protect Your Workforce and Your Bottom Line

Artificial intelligence is transforming the modern workplace by automating tasks, enhancing decision-making, and increasing efficiency.

But like any powerful tool, AI comes with pros and cons. As companies race to integrate AI into their operations, they must consider the impact of possible data breaches, algorithmic bias and system failures, to name a few. The good news? Business insurance can be a key safety net in this fast-evolving landscape.

AI: The Pros and Cons

From HR screening tools to automated customer service and predictive analytics, AI is now embedded in many everyday business functions. But when AI goes awry, the consequences can be significant.

Here are some key risks:

Data Privacy and Cybersecurity

AI often relies on large amounts of data, including sensitive employee, customer or financial information. If these systems are not used properly, it could result in a data breach, exposing private information such as credit card and social security numbers, or even federally protected medical information. This could lead to lawsuits or regulatory penalties.

Cyber liability insurance can help cover the costs of breach notification, legal fees, regulatory fines, and even public relations efforts after an AI-related data incident.

Algorithmic Bias and Discrimination

AI learns and creates using publicly available data. If the data used contains bias or is incorrect, AI can worsen a situation by helping you publish bad information and advice.

Employment practices liability insurance (EPLI) can help protect companies against claims of discrimination, wrongful termination, or hiring bias.

Automation Errors

AI can make some decisions, but not always accurately, so all instances in which AI is used must be double-checked by a human. For example, a flawed algorithm might result in ordering too little or too much inventory. In financial services, an error in a predictive model could result in significant losses.

Professional liability (errors and omissions) insurance may cover damages caused by flawed AI output, especially when those tools are used in advisory or service capacities.

Intellectual Property

If your business uses generative AI for design, marketing, or software, you could face legal risks over copyright infringement or misappropriation of intellectual property owned by others. That’s because AI learns by and pulls publicly available information and uses it to build your content.

Media liability or IP infringement insurance could help cover legal issues tied to disputes involving AI-generated content.

Why Insurance Should Be Part of Your AI Risk Strategy

Lawsuits and investigations related to AI are already happening. Consider, for instance, the that the New York Times sued Microsoft and OpenAI in 2023 for using its copyrighted content without permission.

Businesses will be increasingly held accountable for how they deploy AI in the United States and beyond. The United Nations, European Union and the United States federal government are considering regulatory needs.

Insurance does not replace personal responsibility for the proper use of AI, but it can serve as a financial backstop for unintended consequences.

Five Tips for Protection

• Conduct regular audits of AI systems
• Monitor for bias or unintended outcomes
• Ensure transparency in how AI tools are used
• Properly train employees on AI use
• Create a company policy for use of AI

Artificial intelligence can be used to help enhance your business, but the potential risks should not be ignored. As your organization embraces AI, build a risk management framework that includes robust insurance coverage.

This article also appeared on Columbus Business First.

Reach out to Oswald for guidance on managing AI-related risks—from data privacy to automation errors—with insurance solutions tailored to your business.