AI opportunities and risks Is your business prepared?
In a 2025 survey conducted by the IoD, in collaboration with Hiscox, technology and software – including AI – emerged as the second-highest business priority, behind driving growth. Yet intriguingly, when asked about risks, AI did not appear among the top five concerns of directors.
Benefits and challenges of AI usage
AI is rapidly becoming embedded in everyday business practices. Recent research shows that nearly one-third of UK SMEs use AI tools daily, with another 15% actively experimenting with them (source: YouGov).
Examples of how small businesses are using AI include diary and email management, creating content, customer communications, as well as human resources (HR) and recruitment (source: British Business Bank).
Furthermore, AI is being adopted across professional services like law, accounting, and consulting to automate routine tasks – such as reviewing contracts, analysing data, and drafting documents, with major firms investing heavily in AI tools (source: Financial Times).
Although there is little doubt about the powerful operational advantages that AI can deliver, the associated risks should not be overlooked.
Errors in AI-generated outputs could result in incorrect advice, financial loss, or reputational damage. In such cases, who is accountable? The professional, the software developer, or the AI itself? These questions are particularly important from an insurance perspective.
AI insurance implications
When asked about the implications of AI-related risks on the UK insurance market, Adam Atkins, head of technology underwriting at Hiscox, said:
“In January this year, the UK government published its ‘AI Opportunities Action Plan’ which outlined a comprehensive strategy that aims to position the UK as a global leader in AI.
This is a big statement and interesting when you compare the UK’s approach to the likes of the EU, where they plan to take a much more conservative approach.
The UK’s approach will likely see a positive economic impact with increases in investment into UK AI, which will see more UK businesses building, using and selling AI.
This creates an interesting opportunity for the UK general insurance market, where decisions will need to be made around coverage.
For example, should professional indemnity policies automatically cover professional negligence losses where the contributing cause is erroneous AI outputs?
Should we view this as being part and parcel of professional services and just view AI as a business tool, much like Microsoft Excel, or are the fundamentals of AI significantly different, requiring a narrower and more restrictive coverage approach?
These are the questions that UK insurers will be asking themselves currently.
Hiscox recently updated its technology professional indemnity wording to grant clear and affirmative cover for professional negligence claims caused by AI because they deemed this to be an intrinsic risk attached to the technology sector, for which clear cover was both needed and ‘underwritable’.
Should a similar approach be applied to other professional trades like accountants, surveyors, and solicitors, where the core business activities are less intrinsically linked to technology-usage? Again, these are questions that the industry will need to consider.”
Key actions for directors:
To navigate the opportunities and risks associated with AI, directors may wish to consider the following steps to support their AI usage, ensure proper insurance coverage, maintain strong oversight, and stay informed about evolving regulations.
- Know your AI – Identify where AI is used in your business, both internally and externally.
- Check your insurance – Discuss with your insurer whether your policies cover AI-related risks relating to your business or industry.
- Prioritise AI governance – Ensure your AI usage is strategic, ethical and accountable – following good governance practices (guided by IoD’s AI framework).
- Stay updated – Keep track of changing AI policy, regulations and insurance developments.
How business insurance can help
If you’re unsure whether your current business insurance covers AI-related risks, now could be a good time to review your policies and secure the protection your company needs for the future.
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