Generative artificial intelligence (AI), the latest evolution of AI, automates and produces content, including text, images and data analysis. This technology is revolutionizing industries, leveraging vast datasets and algorithms to produce output mimicking human creativity and intelligence.

While the business benefits are significant, business owners and leaders would be wise to exercise caution and consider the risks associated with generative AI. Fortunately, as trusted advisors, independent insurance agents play an important role in helping clients understand potential risks through proactive consultation and effective risk management strategies.

In businesses today, generative AI is being leveraged to enhance automation, improve customer service through chatbots, and even assist in medical research by generating new hypotheses and analyzing data. At the same time, however, generative AI poses risks ranging from a lack of transparency to intellectual property infringements, such as content creation that inadvertently infringes on copyrights.

Security concerns exist, as this technology may be exploited for malicious purposes, such as creating deepfakes. And if employees use personal data in training models, this can lead to privacy breaches.

Generative AI problems can result in many types of losses, depending on the nature and outcomes of the incidents. Here are just two examples of losses resulting from the use of generative AI:

1) Privacy Coverage. A video company recently was ordered to pay $2.25 million in an AI-related privacy lawsuit. The company collected and stored customers' biometric data without proper consent and agreed to this settlement to resolve claims.

2) Copyright. A firm sued an AI tech company for generating an image that infringed on existing copyrights, resulting in a lawsuit.

With these emerging risks, independent insurance agents are closely following the broad set of use cases for generative AI and identifying associated risks. Additionally, they are initiating conversations with clients about the limitations and risks of generative AI.

By making clients aware that generative AI is increasingly integrated into regular business operations, like the rise of cloud computing years ago, agents are discussing the assessment of appropriate risk management and coverage needs. This includes an explanation of risks associated with AI including data breaches, intellectual property issues and potential biases caused by algorithms overemphasizing data patterns.

Beyond understanding the risks associated with the technology, agents are also helping customers understand the importance of being compliant with regulations related to data privacy and AI while encouraging ethical practices and transparency.

A comprehensive risk management strategy may include regular audits, data quality assurance and robust cybersecurity measures to complement insurance coverage. This consultative strategic approach positions agents as trusted advisors.

By staying informed about the evolving landscape of this technology, independent insurance agents can help business clients proceed carefully in the utilization of this cutting-edge technology with appropriate risk management and coverage strategies.

Matt Mitchell, president of middle market, The Hanover.