The AI risk gap: Why businesses lack coverage

Artificial intelligence has quickly proven itself as the latest technology game-changer. A recent survey found 79 per cent of businesses already use AI in some capacity, with most planning to increase its use in the coming years.

Be it data analytics, research and development, price modelling, or customer support AI is rapidly becoming essential to business operations. However, this adoption introduces new risks, heightened by a changing regulatory landscape with different jurisdictions taking different approaches.

But, only 32 per cent of businesses are confident their current insurance programme address AI risks adequately. So, how can you be sure you have the right cover?

How AI use cases and risks are changing

Like the internet, smartphones, and cloud computing, AI is impacting life in multiple ways. This flexibility can be seen in how it’s used across industries, whether a tool is driving efficiencies, lowering costs, or delivering more accurate results faster. According to the survey, more than two in three businesses are harnessing AI for improved data and analytics, while over half are implementing AI in marketing and to enhance employee productivity.

Navigating global AI regulation

In the EU, the AI Act is the first comprehensive regulation of its kind, establishing a legal framework for AI development and use. The Act classifies AI systems based on the risks they pose, aiming to reduce uncertainty and promote safe, responsible development.

Meanwhile, the UK is adopting what’s perceived to be a more flexible, pro-innovation approach, relying on existing regulators and encouraging companies to innovate faster. Currently, the plan is to manage AI sector by sector, allowing regulations to be tailored to unique AI challenges and opportunities presented in different industries.

Across the US, there’s no single national AI law. Regulation is currently shaped by a combination of federal initiatives, state-level legislation, and evolving industry standards.

For businesses, especially those operating internationally or trading across borders, understanding these regional differences is critical. It’s no surprise the survey found compliance and regulatory issues to be a top concern of using AI. Compliance can be difficult to achieve, particularly as what’s compliant in one jurisdiction may not be in another.

The insurance gap in the AI era

While businesses are looking to take advantage of the benefits of AI, many are still unclear whether their current insurance policies offer adequate protection. Demand is growing for insurance that keeps pace with this fast-moving technology, but there’s still a lack of understanding when it comes to AI risks, at a time when the majority of businesses already use the technology. So how can we close the protection gap?

Innovation shouldn’t come with uncertainty. That’s why it's essential to build AI protection into insurance policies across a wide range of industries including technology, finance, professions, healthcare, media, and more. AI can seem complex.

But with comprehensive cover in place, mitigating the risks can be simple.

To find out more about covering AI risks in your business, speak to Rebecca Sugden at Alan Boswell Group on 07386 952199.

• Article produced by CFC in partnership with Alan Boswell Group.