- Adoption of artificial intelligence is at an all time high with almost two-thirds of businesses testing AI in the last year and half implementing the technology
- Top uses for firms adopting AI include writing company documents, market research, handling customer queries, informing strategic direction and recruitment administration
- Business owners cite top risks they are concerned about when using AI are errors in models providing incorrect information, increased risk of privacy violations, legal liability for the misuse of AI and increased risk of cyber attacks
- Gallagher warns of growing likelihood of claims from the use of AI unless it is properly governed
Research amongst businesses globally1 by insurance broker and firm management firm Gallagher shows that the use of AI has grown exponentially over the last year, with many firms now taking advantage of the benefits it offers. The data revealed that 45% of businesses were using AI in their day-to-day operations at the end of 2024, an increase of a third (32%) over the 12 months prior. Larger firms, with greater resources to bring to bear in the transformation, report significantly higher AI adoption success, at 82% up from 69% a year ago.
This upshift is due to AI being viewed as a valuable tool for increasing efficiency by automating tasks, enhancing decision-making and driving innovation. 44% of business leaders cite improved problem-solving as a top benefit, while 42% say the technology is boosting employee efficiency and productivity and freeing them up to do other tasks.
Looking at how AI is being used, the top use-cases for AI include writing emails / agendas with 32% of businesses utilising AI for this purpose, a similar number (31%) are using it to handle customer queries and 28% of firms are using AI to understand market dynamics.
However, with many firms now relying on AI for business-critical tasks, it is crucial to recognise the risks associated with AI and how the use of it needs to be carefully managed. In the research, business leaders reported feeling more aware of the risks of AI today than they were a year ago, and with AI and its use fast evolving, it is clear that the risk landscape is changing quickly.
AI errors, or “hallucinations,” where the system generates inaccurate results, top the list of threats according to just over a third (34%) of business owners. Other key concerns include data protection and privacy violations (33%) and legal liabilities (31%) related to AI misuse.
Using AI for research
Business leaders are right to be cautious as Gallagher is predicting an increase in legal liabilities for firms where the use of AI is not properly governed. One particular area of concern is for firms or contractors that are relying on AI based research if they provide professional services or advice to clients. If they use information which turns out to be incorrect, they are at significant risk of having to pay out legal costs, expenses, damages, and settlements to clients.
Ben Waterton, Executive Director of Professional Indemnity at Gallagher, said: “AI is now an intrinsic part of our everyday lives - facial recognition, navigation systems and search recommendations and advertising are examples we encounter on a daily basis. However, the output from AI is only as good as the data that is input and cannot be relied upon blindly. There have been a number of cases where individuals being paid for their professional expertise have been found to be using AI generated information which was incorrect and have led to them being exposed to costly negative outcomes.
“AI systems excel at processing vast amounts of data and identifying patterns that may not be readily apparent to humans. However, they cannot replace human expertise and judgment that qualified individuals bring to their work. Relying solely on AI without critical examination and human oversight can lead to serious consequences and compromising advice. The quality assurance procedures and oversight of employees must evolve to ensure that this emerging risk is recognised and addressed to prevent professional indemnity losses.”
Cyber exposures
Firms should also be aware of the raft of cyber exposures the use of AI may expose them to. According to Gallagher’s in-house cyber specialists the use of AI could lay open firms to privacy and data protection risks. This could include individual actions and potential class actions for privacy violation including data usage rights infringement, data poisoning and regulatory infringement.
AI is also driving more sophistication amongst cyber criminals and allowing malicious actors to target vulnerabilities with greater efficiency and scale, making them harder to detect and defend against; essentially putting more powerful tools in the hands of cybercriminals, at a time when they themselves are becoming more sophisticated.
Commenting on the availability of cover, James Pearce, Cyber Account Executive at Gallagher said: “Historically, the cyber insurance market has been adept at adjusting to new threats over time, and the expectation is that it will do the same with risks related to AI. However, as AI risks become more defined, insurers are starting to review their cover on policies and businesses using AI need to check if they do have coverage if a cyber-attack or privacy violation due to AI exposures were to take place.”
Directors’ & Officers’
The use of AI increases the risk of a claim against leaders of businesses and mainly falls into two different areas - AI washing where a firm overstates its AI capabilities and where AI hallucinations generate incorrection information which is used to make business decisions or provided to clients. Both of these scenarios could lead to regulatory scrutiny, legal challenges, compliance issues, and legal liabilities all of which could fall on boards of directors who could face lawsuits and potential breach of fiduciary duty claims for failing to implement appropriate company oversight for AI use.
Laura Parris, Executive Director of Directors’ & Officers’ Insurance at Gallagher, said: “Corporate misuse of AI presents growing risks for business leaders, with AI washing overstating or misrepresenting AI capabilities leading to increased scrutiny. We have seen legal action against companies for misleading AI claims, investor disputes over the effectiveness of AI-driven products, and regulatory enforcement against firms making false statements about their AI use. As oversight intensifies, transparency and accountability in AI-related disclosures are more critical than ever.”