Artificial intelligence is quickly becoming part of everyday business. From drafting emails and creating content to analysing data, writing code and automating internal processes, AI tools are helping businesses work faster and do more with fewer resources.
But while businesses have been quick to adopt AI, insurance policies are now playing catch-up.
Australian insurers are beginning to introduce AI-specific wording into business insurance policies, including both explicit AI cover and exclusions. For business owners, this means something that may previously have fallen into a grey area could now have much clearer boundaries around what is—and isn't—covered.
And that's a good reason to take a closer look at your policy at your next renewal.
AI is changing the risk landscape
Until recently, many business insurance policies didn't specifically mention artificial intelligence. If an AI-related incident occurred, the question of whether it was covered would generally depend on the existing wording of the policy.
That's beginning to change.
Some insurers are introducing what's known as affirmative AI cover, which specifically outlines how a policy will respond when AI is involved. Others are introducing exclusions that limit or remove cover for certain AI-related risks.
Having clearer wording can provide greater certainty, but it can also introduce new responsibilities for businesses. Insurers may want to understand what AI tools are being used, what information they can access and what processes are in place to manage their use.
For business owners, the important question isn't simply "Do we use AI?"
It's "Do we understand how our use of AI affects our business risk and insurance cover?"
Four areas worth discussing with your insurer
Rather than trying to predict every possible AI risk, there are a few practical areas businesses should consider.
1. What is your AI creating?
Businesses are increasingly using AI to produce written content, images, designs, presentations, software code and other intellectual property.
But what happens if something generated by AI is later alleged to infringe someone else's copyright or intellectual property?
If AI-generated material is being published, sold or incorporated into client work, it's worth understanding whether your existing professional indemnity, liability or other relevant insurance responds to a potential claim.
It may also be worth asking whether the wording around intellectual property or AI has changed since your previous renewal.
2. What is your team building with AI?
One of the biggest changes we're seeing is how easily employees can now create their own software, automations and internal tools.
Something that once required a developer can potentially be built in an afternoon using AI.
That's incredibly useful—but it can create another layer of cyber risk.
An employee might create a simple tool for managing customer information, expenses or internal data. Six months later, nobody is actively using or maintaining it, but the application may still exist and still have access to sensitive information.
Businesses should understand what internal AI-powered tools are being created, what data they access and whether internally developed applications are covered by their cyber insurance.
3. What is your AI telling customers?
The stakes become higher when AI contributes to advice, recommendations or information provided directly to customers.
If a client relies on AI-assisted advice and suffers a financial loss as a result, professional indemnity insurance may become relevant.
This is particularly important for businesses operating in advisory or professional services.
Human oversight remains an important safeguard. Having appropriate review processes—and being able to demonstrate that those processes were followed—can help businesses manage both operational and insurance risk.
AI can assist your team, but that doesn't necessarily mean it should be making the final decision.
4. How dependent is your business on AI?
Think about what would happen tomorrow if one of the AI platforms your business relies on suddenly became unavailable.
Could your team continue working?
Could you service customers?
Would an outage result in lost revenue?
Traditional business interruption policies have generally been designed around disruption to a business's own systems and operations. An outage affecting an external AI provider may not necessarily trigger the same cover.
As businesses become increasingly dependent on cloud-based and AI platforms, understanding these dependencies is becoming an important part of business continuity planning.
The hidden challenge: knowing how AI is being used
Perhaps one of the biggest risks isn't the AI tools a business has formally adopted. It's the tools being used without anyone knowing.
Employees can access AI applications from their browser or phone within seconds. They may be uploading documents, customer information, financial data or intellectual property without understanding where that information is being stored or how it could be used.
That creates challenges for cyber security, privacy, governance—and potentially insurance.
Creating a simple AI policy for your business can help establish expectations around which tools are approved, what information can be entered into them and when human review is required.
It also gives business owners greater visibility over their actual exposure.
Make AI part of your next insurance conversation
AI isn't something businesses need to fear, nor is the answer to stop using it. For many businesses, these tools are already delivering genuine productivity and efficiency gains.
But as AI becomes embedded in everyday operations, it needs to become part of the same conversations businesses already have about cyber security, privacy, professional risk and business continuity.
At your next insurance renewal, don't simply ask whether your premium has changed.
Ask whether your policy wording has changed too.
And specifically, ask how your cover responds when AI is involved.
A few questions now could prevent an unpleasant surprise when you actually need to make a claim.
This article provides general information only and does not constitute insurance, legal or financial advice. Businesses should discuss their individual circumstances and insurance requirements with their licensed insurance adviser or broker.
SOURCES: Smart Company