Understanding AI liability and why transparency is vital
Artificial intelligence (AI) is an ever-growing force around the world and with an increasing number of businesses developing and using the technology, it’s no wonder everyone is talking about AI liability.
But what is AI liability? How can you make sure your business is covered? And who’s really responsible when an AI agent goes rogue?
Is AI liability a real insurance product?
The short answer is no, not yet. You can’t buy an AI liability product like you can public liability or employers’ liability, but that could change in the future.
AI liability is a concept that relates to the legal and financial responsibility a business might face if their AI systems cause loss, damage, injury or harm to a third party.
Who’s responsible when an AI system gets it wrong?
Unlike a human employee, an AI platform can’t be held personally responsible for its actions. If an AI tool provides incorrect advice, makes a wrong decision, breaches copyright or exposes personal data, the business behind the technology is responsible.
That means that any business deploying, developing or selling AI technology is liable and, as AI adoption accelerates, companies are seeing that innovation and liability go hand in hand.
What are the most common examples of AI Liability?
The risks vary, depending on how AI is used, but the most common examples include:
- Incorrect AI outputs that cause a client to suffer financial loss.
- AI data protection breaches that result in sensitive or personal data being exposed, causing regulatory investigations and compensation claims.
- Intellectual property disputes when an AI model generates content that allegedly infringes copyright, trademark or other intellectual property rights.
- Bias and discrimination claims when AI-driven decision-making tools result in outcomes perceived to be unfair, biased or discriminatory.
- System failures and interruptions that cause financial losses for customers.
How can I be confident my business is covered?
The best thing you can do to make sure you’re covered is to be transparent.
A common mistake is describing a business as a software company without clearly explaining how that company uses AI.
Most insurers consider the use or creation of AI development, machine learning and large language models to be material underwriting information, which means you must disclose it.
The more accurately you present your business and technology, the more confidence both you and your insurer can have in the cover provided.
How to manage the risks
AI brings enormous opportunities across every industry but to manage the risk, it’s critical businesses understand that the legal, regulatory and contractual responsibilities remain firmly with the companies that develop, deploy and rely on the technology.
Understanding your potential liabilities is just as important as understanding the technology itself.
As AI becomes more powerful, having the right risk management and insurance programme in place is no longer a nice-to-have, it’s a fundamental part of building a sustainable and resilient AI business.
Get expert support today
We work with AI developers, software businesses and technology firms to identify emerging risks and arrange AI insurance that evolves alongside their business.
Call our friendly team of experts today.
