The rise of artificial intelligence (AI) is transforming industries, from automation in manufacturing to advancements in customer service. But while AI is an excellent tool for businesses, it also creates new risks. Complicating the picture is the fact that traditional insurance policies don’t often account for the complexities of AI-related damage – and this leaves gaps in coverage for many companies.
As AI technology becomes more integrated into everyday business operations, it’s important to understand the types of coverage that can protect against AI-related damage.
Cyber Liability Insurance
Cyber liability insurance is one of the most essential types of coverage for businesses that rely on artificial intelligence. Since AI systems often handle sensitive data, it might make them susceptible to cyber threats, data breaches, and malicious attacks.
AI systems can be vulnerable to hacking or manipulation, where cyber criminals gain access to algorithms, personal data, or other private information.
What cyber liability insurance can cover:
• Data breaches and loss of sensitive information
• Costs of repairing and restoring compromised systems
• Legal costs and regulatory fines related to data breaches
• Notification costs to inform customers of a data breach
What is cybersecurity insurance, and does your company need it?
Professional Liability Insurance (Errors & Omissions)
Professional liability insurance, also known as errors and omissions (E&O) insurance, provides coverage for businesses against claims of negligence or failure to perform professional duties. In the case of AI, this coverage is helpful if AI systems cause errors or make inaccurate predictions that businesses act on.
What professional liability insurance can cover:
• Legal fees associated with defending against claims of negligence
• Settlement costs or court-awarded damages
• Losses due to the failure of AI-based services or products
Product Liability Insurance
Product liability insurance is essential for businesses that create or sell products, including AI-powered devices or services. This type of insurance can cover the costs associated with defective products that cause harm or damage to consumers or their property.
AI products, from smart devices to medical equipment, can malfunction, leading to property damage or even physical harm.
What product liability Insurance can cover:
• Bodily injury or property damage caused by defective AI products
• Legal fees associated with defending against product liability claims
• Compensation to consumers for harm caused by AI products
Manufacturing & Distribution – Complex Risks. Innovative Insurance Solutions
Technology Errors and Omissions Insurance
Technology errors and omissions (Tech E&O) insurance is a specialized form of professional liability coverage that specifically addresses risks related to technology services and products, and that includes AI-driven systems.
Tech E&O insurance can help cover the legal and financial consequences of AI failures. These might include scenarios where AI fails to meet performance expectations, causes unintended harm, or leads to financial loss due to faulty software.
What tech E&O can cover:
• Financial losses due to failure of AI systems or services
• Legal fees associated with claims of negligence or breach of contract
• Costs for defense against claims related to failure of AI-driven services
Intellectual Property (IP) Insurance
When developing or deploying AI technology, companies may face challenges related to patent infringement, trade secrets, and copyright protection. Intellectual property insurance provides coverage against such risks.
What intellectual property (IP) insurance can cover:
• Legal fees and damages related to intellectual property disputes
• Defense against claims of patent infringement
• Costs of licensing agreements or settlements
General Liability Insurance
General liability insurance might offer protection against claims of bodily injury or property damage that may arise from the use of AI products or services.
For example, a malfunctioning AI-powered robot in a factory could injure an employee.
What general liability insurance can cover:
• Bodily injury or property damage that occurs on your business premises or from your products/services
• Medical expenses and legal defense fees associated with accidents or injuries
As AI continues to permeate business operations, it’s essential to adapt existing insurance strategies to address the unique risks posed by these technologies.
Roehr Insurance can make sure you have the right business insurance coverage in place to protect your company from the emerging risks that come with using AI technology. Whether you are using AI to power customer service, automate processes, or develop new products, understanding and investing in the right insurance policies can safeguard your business.
