A survey by insurance experts Everywhen asked businesses and professionals to identify the biggest PI risk facing organisations today, with 41% selecting AI mistakes, ahead of cyber risks at 35%. Compliance failures were identified by 23% of respondents, while just 1% selected vendor failures.
The findings point towards a significant shift in the risks surrounding professional services. While PI insurance has traditionally been associated with human errors such as incorrect advice, missed deadlines, negligence and contractual disputes, businesses must increasingly consider what happens when technology plays a role in the decisions, advice, and services they provide.
The rise of generative AI has allowed businesses to automate and accelerate everything from research and analysis to customer communications, document preparation, and professional advice. But greater use also raises an increasingly important question: who is responsible when AI gets it wrong?
An AI-generated document containing inaccurate information, an automated recommendation based on flawed data or unchecked AI output incorporated into professional advice can potentially create financial and reputational consequences for both businesses and their clients.
The survey suggests this is no longer regarded as a future or theoretical concern. AI mistakes are already perceived as a greater PI threat than compliance failures and other established areas of professional risk.
Neil D’Mello, Client Director at Everywhen, said: “Professional Indemnity, and traditional risks have long been centred around human judgement, the advice somebody gives, the deadline somebody misses or the error somebody makes. Technology is beginning to complicate that picture. “AI can be an incredibly useful tool for businesses, but using technology doesn't necessarily remove responsibility for the outcome. If AI-generated information forms part of the advice, work or service provided to a client, businesses need to understand how that information has been produced and ensure appropriate checks remain in place.
“What is particularly interesting about these results is that AI and cyber together account for 76% of responses. It suggests businesses increasingly see their greatest professional risks as being connected to technology. The challenge now is making sure risk management, and insurance arrangements evolve at the same pace as the technology businesses are adopting.”
“AI has the potential to enhance client service and streamline decision-making, but brokers should understand how AI-generated information is being used within their advice processes. Appropriate oversight can help ensure clients receive high-quality advice and reduce the potential for Professional Indemnity exposures. Ultimately, clients will continue to look to their broker for trusted professional advice.”
Digital risk moves to the heart of professional liability
Cyber risks being selected by more than a third (35%) of respondents reinforces the extent to which professional and digital exposures are becoming intertwined. Businesses increasingly hold sensitive client information, communicate and deliver services digitally and depend on cloud platforms and interconnected systems. A cyber incident can therefore extend beyond disruption or data loss and potentially affect a company's ability to fulfil its professional obligations to clients.
At the same time, regulatory expectations are developing as businesses navigate new technologies, data requirements and increasingly complex compliance environments. Everywhen says the findings underline the importance of businesses looking beyond the traditional definition of professional error when considering their exposure. Rather than asking only what happens if an employee makes a mistake, organisations may increasingly need to consider what happens if the technology they rely upon makes one too, and where responsibility ultimately lies.
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