Growing Adoption of Artificial Intelligence in Business
The integration of artificial intelligence (AI) into the business sector has seen unprecedented growth, with nearly two-thirds of companies experimenting with AI over the past year. Notably, half of these businesses have already implemented AI solutions. Gallagher emphasizes that while AI adoption is surging, it also introduces a spectrum of new risks, including the potential for AI-related claims if not managed correctly.
AI Usage Statistics
According to Gallagher’s findings, by the close of 2024, 45% of enterprises were utilizing AI in their daily operations, marking a 32% rise from the previous year. Larger organizations, equipped with more resources, report even higher AI usage, with 82% engaging AI technologies, up from 69% in 2023. This surge is largely attributed to AI’s capabilities in enhancing efficiency, streamlining decision-making processes, and fostering innovation.
- 44% of business leaders identify improved problem-solving as a significant advantage.
- 42% acknowledge AI’s role in boosting employee productivity, freeing them to concentrate on other tasks.
AI finds its most common applications in composing emails and agendas (32%), managing customer interactions (31%), and analyzing market trends (28%).
Risks Associated with AI Usage
As businesses increasingly depend on AI for critical operations, Gallagher underscores the necessity of recognizing and mitigating related risks. Business leaders report heightened awareness of AI-associated risks compared to a year ago. Given AI’s rapid evolution, the risk landscape is equally dynamic.
Among the primary concerns are AI system errors, or “hallucinations,” where systems produce inaccurate outcomes. This issue worries over a third (34%) of business owners. Additionally, concerns about data protection, privacy violations (33%), and legal liabilities (31%) due to AI misuse are prevalent.
Gallagher anticipates a rise in legal liabilities for businesses that neglect proper AI governance. A significant worry involves firms or contractors relying on AI-generated data for professional services or advice. Using inaccurate information could lead to substantial legal expenses, damages, and settlements.
Ben Waterton, Executive Director of Professional Indemnity at Gallagher, states, “AI is now an intrinsic part of our everyday lives—from facial recognition to navigation systems and personalized advertising. However, the quality of AI output hinges on the input data, and it should not be relied upon blindly. Instances exist where professionals have used incorrect AI-generated data, resulting in costly negative outcomes.”
AI excels in processing vast data sets and uncovering patterns invisible to human analysts. Yet, it cannot replace the expertise and judgment that human professionals bring to their roles. Sole reliance on AI, without human scrutiny and oversight, can lead to serious repercussions. Thus, quality assurance protocols and employee oversight must evolve to address emerging risks and prevent professional indemnity losses.
Cyber Risks and AI
Gallagher warns of new cyber risks introduced by AI. Their cyber specialists highlight potential privacy and data protection risks, including data usage rights infringements, data poisoning, and regulatory infractions.
AI also empowers cybercriminals, enhancing their ability to exploit vulnerabilities more efficiently and on a larger scale, making cyber-attacks more challenging to detect and repel.
James Pearce, Cyber Account Executive at Gallagher, mentions, “Historically, the cyber insurance market has shown resilience in adapting to new threats over time. The same is expected with AI-related risks. As these risks become clearer, insurers are revisiting their policies, and businesses utilizing AI must ensure they have coverage for potential cyber-attacks or privacy breaches due to AI exposures.”
Liability Risks from AI Use
AI adoption also raises liability risks for business leaders, particularly in two critical areas: AI washing, where companies exaggerate their AI capabilities, and AI hallucinations, where inaccurate AI-generated data informs business decisions or is shared with clients. These scenarios may lead to regulatory scrutiny, legal challenges, and compliance issues, potentially exposing company boards to lawsuits and breach of fiduciary duty claims for inadequate AI governance oversight.
Laura Parris, Executive Director of Directors’ & Officers’ Insurance at Gallagher, notes, “Corporate misuse of AI poses growing risks for business leaders. Overstating or misrepresenting AI capabilities can lead to increased scrutiny. Legal actions against companies for misleading AI claims, investor disputes over AI-driven products’ effectiveness, and regulatory enforcement against firms making false AI use statements are becoming more common. As oversight intensifies, transparency and accountability in AI-related disclosures are more crucial than ever.”
