No matter where you look online, there’s no escaping news of the dawn of artificial intelligence (AI) technologies that may upend how people and small businesses create, consume, and use content, data, software code, and other digital assets.

As intriguing as this nascent technology is, there are inherent risks for small business owners and self-employed professionals to be wary of if they use AI. 

Canadian AI experts and chief executives are encouraging the federal government to pass Bill C-27, the Artificial Intelligence and Data Act (AIDA), as soon as possible to regulate the use of AI systems. However, Ottawa says AIDA won’t come into force until 2025.

That may leave business owners and professionals in a quandary. Should you or shouldn’t you deploy AI tools at your business?

Assessing how AI can help small businesses.

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According to research consultancy KPMG, more than one-third (37%) of Canadian companies are looking at ways the popular generative AI platform ChatGPT can improve their operations. Currently, about 35% of Canadian businesses say they’re using AI in their operations, with four in 10 saying they use it in their call centres.

There are both risks and opportunities for small businesses to embrace the use of AI. Here’s an overview of AI tools, how they can be used, and what the pros and cons are:

What Are AI Tools?

AI tools are software applications or systems that utilize artificial intelligence techniques to perform specific tasks or enhance human capabilities. 

These tools are designed to mimic or simulate human intelligence to some extent, allowing them to analyze data, make decisions, and perform tasks autonomously or with minimal human intervention. 

The generative AI that the world is focused on today has taken decades to develop. It was in 1950 when Alan Turing published a paper on “Computing Machinery and Intelligence” that the concept was introduced. His paper suggested machines can use information and logic to think and make decisions or solve problems.

How Can Your Business Use AI Tools?

Depending on your business and industry, there are different ways you can leverage the use of AI tools to improve efficiency and the customer experience. For example:

Customer Service

AI-powered chatbots have been around for a while and can handle customer inquiries, provide support, and assist with order tracking.

Data Analysis

AI tools can quickly analyze large volumes of data and extract meaningful insights for customer data analysis, market research, sales forecasting, or identifying trends and patterns to inform decision-making.


Repetitive tasks your employees do can be automated to streamline internal processes, such as data entry, inventory management, invoicing, or scheduling.

Predictive Analytics

AI algorithms can analyze historical data to make predictions and forecasts. Small businesses can leverage predictive analytics for demand forecasting, inventory management, pricing optimization, or identifying potential customer churn risks.

Content Generation

Platforms like ChatGPT can assist in creating and curating content based on the prompts and language you provide or the questions you ask it.

Cybersecurity and Fraud Detection

Identify potential cybersecurity threats, detect fraudulent activities, and protect sensitive data. AI technology can analyze patterns, anomalies, and behaviours to detect and prevent security breaches.

Voice Search Optimization

AI-powered voice assistants like Siri, Alexa, or Google Assistant can be integrated into small business applications or websites. Additionally, optimizing content for voice search can help small businesses rank higher and reach customers using voice-enabled devices.

The Pros and Cons of Using AI Tools

As with any technology, there are upsides and downsides to using AI tools in your business.

The pros:

  • Increased Efficiency: AI tools can automate repetitive and time-consuming tasks, freeing employees to focus on more strategic and high-value activities. For instance, in fields like healthcare, AI can play a transformational role in the manual and administrative tasks people find burdensome and time-consuming. 
  • Enhanced Customer Experience: AI-powered chatbots, personalized recommendations, and customer data analysis can help businesses deliver tailored and engaging experiences. It can potentially improve customer satisfaction and loyalty and drive higher conversion rates.
  • Data-Driven Insights: AI tools can analyze large volumes of data and provide valuable insights to inform decision-making. Businesses can better understand customer behaviour and market trends to optimize customer relationship management and other strategies accordingly.
  • Cost Savings: Businesses can reduce labour costs and streamline operations by automating tasks. AI tools can handle customer support, data analysis, or repetitive administrative tasks, minimizing the need for additional staffing.
  • Competitive Advantage: Small businesses that leverage AI tools may gain a competitive edge. AI can help improve operational processes and deliver personalized experiences, setting businesses apart from competitors.

The cons:

  • Implementation and Maintenance Costs: Adopting AI tools may involve upfront costs, including software licenses, hardware upgrades, or employee training. Small businesses with limited budgets may need to assess the financial feasibility and long-term sustainability carefully.
  • Litigation Threats: Using an AI tool like ChatGPT to produce content lacks the ability to provide sources or footnotes, which can lead to potential litigation resulting from libel, slander, and plagiarism.
  • Skill Requirements and Training: Working with AI tools often requires technical expertise. Small businesses may need to invest in training or hire professionals with AI knowledge, which can be a challenge for those with limited resources or access to specialized talent.
  • Ethical and Privacy Considerations: AI tools rely on data and its logic is based on predetermined parameters that exclude nuance and emotion. Small businesses must ensure compliance with data protection regulations and ethical considerations. Handling sensitive customer information or potential algorithm biases requires careful attention and safeguards.
  • Dependence on Technology: Relying heavily on AI means businesses may become dependent on its performance and reliability. Technical issues, system failures, or data breaches can disrupt operations and impact customer experiences if contingency plans are not in place.
  • Human Touch and Creativity: AI tools excel at automating mundane, routine tasks, but they lack the human touch, emotional intelligence, and creativity. Maintaining a balance between automation and personalized human engagement is crucial.

How Should Small Businesses Determine If They Should Use AI Tools?

Here are some steps to help small businesses make an informed decision:

  • Identify Business Needs and Goals: Evaluate your business needs and goals. Determine which areas of your operations or processes could benefit from using AI. For example, consider whether you need assistance with customer service, data analysis, marketing, or operational efficiency.
  • Assess Available Resources: Evaluate the resources you have available, including budget, technological infrastructure, and employee skill sets. Implementing AI may require a financial investment to ensure you have necessary hardware or software, and training employees on how to leverage it effectively.
  • Understand Potential Benefits: Research and understand the potential benefits of AI in your specific industry or business context. Consider how it might enhance productivity, improve decision-making, optimize processes, enhance customer experiences, or provide a competitive advantage.
  • Evaluate Cost-Benefit Analysis: Conduct a cost-benefit analysis to determine if the investment in AI aligns with your business goals. Assess the potential return on investment (ROI) by considering increased efficiency, reduced costs, improved customer satisfaction, or revenue growth. Compare the potential benefits against implementation, maintenance, and employee training costs.
  • Start Small and Test: Consider starting with small-scale AI implementations or pilot projects to assess their effectiveness and impact on your business. That allows you to evaluate the feasibility and performance of AI tools without committing significant resources upfront.
  • Seek Expert Advice: Consult with AI experts, technology consultants, or industry professionals to gain insights into the applicability and suitability of AI for your business.
  • Consider Scalability and Future Growth: Assess whether the AI platforms you’re considering are scalable and adaptable to accommodate your business’s growth and evolving needs. For example, can the AI platform you intend to use integrate seamlessly with your existing systems and infrastructure?
  • Evaluate Ethical and Legal Considerations: Consider any ethical or legal implications of using AI in your business. Ensure compliance with relevant data privacy and security regulations, and establish transparency and accountability measures when handling customer data. For instance, if you wish to use ChatGPT, access its data controls inside your account settings, and turn off the “chat history and training” option. By doing so, the content produced and conversations you have won’t be saved or used to train the system, but they will still be stored on ChatGPT’s servers for 30 days.
  • Monitor Industry Trends: Stay informed about AI advancements and trends in your industry. Assess how competitors or similar businesses use AI tools and evaluate whether it gives them a competitive edge.

It’s crucial to balance leveraging AI technologies and maintaining the human touch in customer interactions and critical decision-making.

How Might AI Tools Affect Your Employees?

While AI technology has the potential to automate specific tasks and processes, it does not have to mean people will universally lose their jobs.  

Here’s a nuanced perspective on how AI may affect employment at small businesses:

  • Automation of Repetitive Tasks: AI can automate routine and repetitive tasks. This shift can lead to job enrichment and the development of new roles that require human creativity, problem-solving, and critical thinking.
  • Job Transformation: Integrating AI can lead to job transformation rather than job losses. Employees may need to adapt their skill sets to work alongside AI technologies, but still rely on their empathy, communication, and emotional intelligence.
  • Increased Efficiency and Productivity: AI can enhance productivity, allowing small businesses to accomplish more with existing resources. That can contribute to business growth, creating new opportunities and potentially leading to new jobs.
  • Upskilling and Reskilling Opportunities: As AI becomes more prevalent, there is an increasing demand for workers with the skills to operate and collaborate with AI effectively. Small businesses can invest in upskilling and reskilling programs to help employees acquire the necessary knowledge and expertise to work with AI technologies.
  • Potential Job Displacement: While widespread job loss is not guaranteed, certain roles involving repetitive, rule-based tasks are more susceptible to automation. For example, positions that include data entry, basic customer support, or manual data analysis may be at risk.

The successful integration of AI often involves a balance between technology and human capabilities, with businesses recognizing the value of both.

To mitigate potential job displacement, focus on reskilling and upskilling your workforce, fostering a culture of lifelong learning, and identifying where your people are essential.

What Are the Insurance Liability Risks to Your Business Using AI Tools?

Small businesses using AI technologies may face several liability risks. Here are some areas of concern:

  • Data Privacy and Security: AI tools often rely on vast amounts of data, including customer information. Inadequate data protection measures or cybersecurity vulnerabilities can lead to data breaches, exposing sensitive information and potentially resulting in legal and reputational damage.
  • Bias and Discrimination: AI algorithms are trained on data, and if the data used is biased or lacks diversity, it can result in biased outcomes or discriminatory practices. That can have legal implications and hurt your business’s reputation if you are found to be engaging in discriminatory behaviour.
  • Legal and Regulatory Compliance: Businesses must ensure that their use of AI complies with applicable laws and regulations, including data protection, privacy, intellectual property, consumer protection, and industry-specific regulations. Non-compliance can result in legal consequences, fines and penalties, and damage to the business’s reputation.
  • Misinterpretation of Data and Decisions: AI makes decisions based on patterns and algorithms but may not always provide accurate or contextually appropriate results. Relying solely on AI-generated insights without human oversight or verification can lead to errors, misinformation, and harmful consequences.
  • Intellectual Property Infringement: If AI algorithms use copyrighted or patented materials without proper authorization or attribution, it can result in legal disputes and financial liabilities.
  • Customer Trust and Expectations: AI may negatively impact customer trust and expectations. If customers feel their data is mishandled or misused or have negative experiences with AI-powered interactions, it can lead to reputational damage and loss of business.

Business owners leveraging AI in their companies may assume that because they did not create the tool they’re using, they aren’t responsible for any mistakes it makes. That is not true. Businesses that buy and use AI-enabled tools could still be responsible for potential outcomes.

To mitigate these liability risks, small businesses should:

  • Implement robust data privacy and security measures to protect customer information.
  • Ensure transparency and accountability in their AI systems, disclosing how data is collected, used, and analyzed.
  • Regularly monitor and audit AI systems to identify and address any biases or discriminatory outcomes.
  • Stay informed about relevant laws and regulations, seeking legal advice if necessary.
  • Use AI as an aid for decision-making rather than relying on it entirely, allowing for human oversight and judgment.
  • Obtain appropriate permissions and licenses for using third-party data or proprietary algorithms.
  • Communicate with customers about how you’re using AI, addressing their concerns and providing clear information on how their data is handled.

How Can Business Insurance Cover AI Tool Usage Liabilities?

A comprehensive business insurance policy is necessary to protect your small business whether you decide to use AI technologies or not. If you do use them, your policy should include the following:

  • General liability insurance can cover allegations from a customer or third party that your company’s use of AI caused them physical or financial harm.
  • Professional liability insurance can cover errors and mistakes an AI platform makes if it produces incorrect results or advice that results in your customers suffering financial losses.
  • Cyber liability insurance covers data breaches and cyber-attacks. You are liable if an AI tool collects, stores, and processes confidential customer information and a data breach occurs.
  • Technology Errors and Omissions (E&O) Insurance is a special coverage for errors in your company’s tech products and services or failure to deliver them as agreed. In this case, you can be sued if an AI technology causes financial harm or fails to meet customer expectations.
  • Intellectual Property Insurance is vital if you’re using AI. Since these tools may use data and information it finds online, they may infringe on someone’s copyrighted material, patents, or trademarks. 

However, insurance alone is insufficient to manage all risks associated with using AI. 

Implementing best practices for data security, conducting regular risk assessments, ensuring proper training and oversight of AI systems, and staying up to date with legal and regulatory requirements are essential steps in managing AI liability risks effectively.

– Reviewed by Justin Tisdale, Team Lead, Professional Lines, and Michael McDermott, Director of Underwriting at Zensurance.

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About the Author: Liam Lahey

Liam is the Content Marketing Manager at Zensurance. A writer and editor for more than 20 years, he has been published in several newspapers and magazines, including Yahoo! Canada Finance, Metroland Media, IT World Canada and others.