AI, Data & Marketing: How To Manage Risks

Tessa Burg: Hello and welcome to another episode of “Leader Generation”, brought to you by Mod Op. I’m your host, Tessa Burg. Today I am joined by Kevin Purvis. He is the managing partner at Cothrom Risk and Insurance Services. And today we’re gonna dive into one of our favorite subjects, and that is all about risk, cybersecurity, data security, and why marketers should be concerned. And I’m being a little sarcastic if you can’t tell. I know we recently had two episodes on responsible use, but today we’re gonna get into the nitty gritty as to what you as marketers should really focus on. We know from recent reports from Reuters and risk strategists that 80% of businesses are very concerned that their insurance may not cover specific losses. And this is directly related to emerging risks from artificial intelligence. We also know from very different reports specific to marketing that over 90% of us as marketers are using AI in our daily work with or without training, with or without the knowledge of our executive and C-suite. So if you are a marketing leader and you manage any size of team, your team is using AI and that is opening up your business for risk. So why is this important? More than ever, there are rising costs of insurance, rising claim costs, and as with any technological advancement, there are people who are looking to use this technology in dangerous and not great ways for their own advantage. So Kevin, thank you so much for joining us. This is obviously a topic that is near and dear to my heart because as an agency, not only do we wanna protect our business, but also that of clients. So we appreciate your time.

Kevin Purvis: Thank you. I’m glad to be here.

Tessa Burg: So before we jump in, first tell us a little bit about yourself and Cothrom Risk and Insurance Services.

Kevin Purvis: Sure, we are a boutique firm in Fort Lauderdale, Florida. We focus on innovation businesses, so a lot of technology, life science, med tech, advanced manufacturing, and what we call the commercial middle market space. I’ve been doing this now for 18 years and always in this venue. And so a lot of experience with emerging risk and particularly technology risks such as AI.

Tessa Burg: Well, the areas you cover really are very similar to the verticals we serve at Mod Op, so I think this will be a very important episode for our clients. Let’s start with what are the biggest risks marketers face today and how can they mitigate them?

Kevin Purvis: Sure. A lot of this is, again, gonna be focused around, what we generally call media liability, which can be issues related to copyright infringement, defamation, slander, but it continues to evolve. And there’s some new things out there. Actually, there’s an old new thing. So many people have tried to use pixel tracking to get a little bit more data on their clients. Some attorneys have figured out how to use the Video Privacy Protection Act of 1988, which prohibited people from tracking who was watching video in this arena with the internet. And so this has become a big litigation issue. So pixel tracking right now is a very big concern for insurers and is ended up with a lot of litigation and a lot of expenses. There’s some very public cases out there right now for hundreds of millions of dollars.

Tessa Burg: Oi.

Kevin Purvis: Yeah.

Tessa Burg: When we think about that consumer privacy, GDPR, CCPA, are those impacting marketing strategies? Are you seeing businesses and marketers take a different approach because of those new compliance standards? Well, GDPR has been around a while, but CCPA specifically?

Kevin Purvis: Yes. People need to pay attention to this and they need to make some changes. And it’s not just the CCPA. Illinois has put through a couple of different ones now. They might not be directly as applicable to marketing with the bio information and the genetic information privacy acts there, but this is gonna continue to domino in the United States and elsewhere, Brazil, Japan all have frameworks around privacy as well. And so it’s an absolute must that you pay attention to this. Otherwise, you are potentially facing a lot of regulatory fines and issues. In many cases, insurance will respond, they’ll help you defend it, but there are gonna be very frequent times when insurance legally cannot cover the fines and penalties that are assessed by a government regulatory body as a result of these violations. So there’s a limit to the amount of protection in certain cases that you can obtain for this. So it’s something that marketers need to pay attention to.

Tessa Burg: Yes. And for marketers who might not be familiar with the acronym CCPA, it is the California Consumer Privacy Act and it is already in effect and it basically gives consumers the right to know what data businesses are collecting on them and opt out. And it applies to any company doing business in California. And the doing business part is pretty broad. So if you have a website and people are interacting on it and you don’t exclude, or somehow magically doubly ensure that people are not coming to your website from California, because even if you can see their IP, that’s not always accurate. So you need to assume that the CCPA applies to you. And we have found that a lot of clients, especially in the marketing department, aren’t able to actually describe the type of data that they’re collecting on users, much less have processes and protocols in place to delete it. Something that I think is really important for marketers as we move forward is making sure that you have that in place, but also really starting to think about what is the value of collecting that data in the first place. We work with a lot of B2B companies. We have a very large performance marketing wing. We, of course, you know, are always looking to make sure we’re delivering and optimizing toward that conversion right message at the right time in B2B and list building and list targeting. But, you know, this could be a whole other episode so I won’t get into it, but with the advent of AI, there are other ways to build community with your target audiences and optimize around a very transparent exchange of data and behavior that you can target on. And with the rising cost of insurance, with the rising awareness from consumers and just general clients, the clients in general wanting to be more protective of their data, it’s one great next step is just to really start looking at how valuable is the data that you’re using and is there another way to reach people in a way that’s more transparent to them. So I just want…

Kevin Purvis: Well said.

Tessa Burg: Yeah, call it out ’cause I think about the CCPA all the time, but, you know, definitely this is not top of mind for busy marketers who are creative and constantly thinking of new ways to connect with their audience. So I wanted to also look at the role in partnerships. So just mentioned, I know this isn’t top of mind for marketers, but who should they be working with within their business, and is there a need for CMO marketing leaders to start exposing more about what they’re doing to other leaders in the company?

Kevin Purvis: Absolutely. That’s something we try to do as a brokerage quite regularly, is most insurance brokers are connected to the CFO for the organization, but in today’s environment, we need to be connected to more than just the CFO. We need to be connected to your CIO or your CTO, whatever the nomenclature is you’re using there. And it would be great to have a conversation with the CMO or whoever is at the top of the marketing to understand what the organization is doing, the tools that it’s using. You know, we’re gonna delve into AI just a little bit more down the road, but as that evolves, that increases the potential for risk. Influencers. If you’re utilizing influencers on a regular basis, you know, what’s the risk to them, what’s the risk to you for the content that gets posted? So it’s good to have these conversations and it usually starts with the getting the CFO involved and broadening the group.

Tessa Burg: Yeah, I love that point. ‘Cause you know, the CFO in a lot of ways can be your friend. Like, they are looking at controlling those premiums. And the more you can do as a company, not only to be aware of regulations that exist, but talking about the tools that you’re using, the training you’re providing your team, and the education you’re giving them around responsible use. ‘Cause again, your team is using AI, it’s just are you training them on how to be responsible with it? But when you start to show evidence of that level of effort, when it becomes more top of mind, it also creates creativity and creative solutioning for how can this become a differentiator for your business. So you mentioned pulling in the CFO, even the CTO, CIO. I think that a lot of times those leaders sometimes will understand, like, the true value of marketing, but at least showing them, like, here’s the type of data we’re collecting, this is how we’re using it. I’ve seen some really awesome solutions come out from those cross collaboration sessions where they can give advice on how to do it more efficiently, more cost effectively, and potentially even introduce resources to help with some automation of the more tedious aspects of research and data collection.

Kevin Purvis: If your organization is large enough, you have a risk manager, then you’ve got another partner to bring into the fold as well. If not, the CFO has the risk manager hat and he’s ultimately responsible for the balance sheet. So understanding what the company is doing and the risk that it creates is important to him in order to protect that balance sheet and make sure they have the appropriate insurance in place.

Tessa Burg: Yep. Could not agree more. So let’s say something does go wrong. So you’ve taken the steps to educate your staff, you’re collaborating across the business, but now, you know, there’s been a data breach or you have discovered some improper use of data and that became public and it’s almost always unintentional. Like, marketing department did not know that this was the unintended consequence. What are the next steps when we’re in this crisis management phase?

Kevin Purvis: Sure. We’ve come a long ways for insurance in the last 18 years that I’ve started. To the point that any business of any size has a cyber insurance policy and that cyber insurance policy is gonna address two key sides to it. One is gonna be network security and the other side is gonna be privacy liability. So if there’s a breach of data as a result of some of this marketing or the content that you have, that’s gonna be the first place that you’re gonna go to. And those carriers are specialized in responding to these types of incidences. So they’ll often have a breach coach as one of the key services that they provide. So when the incident happens, you can reach out to this breach coach. Often you can reach out to ’em at 2:00 AM on a Friday because that’s a lot of times when hackers like to get active on systems while nobody’s around for the weekend. But the breach coach will help the organization handle this process both from a practical standpoint of addressing your IT systems to an outward PR, public relations management if you need that. You know, how do you get the messaging out, without causing damage to your organization or minimizing the damage that could potentially be caused to your organization. So reaching out to the insurer, filing the claim, and getting the different services that they offer is key.

Tessa Burg: And I feel like staff always become much more engaged and aware after a crisis has happened. But do you have any examples that are super public that marketers could point to to try and get that engagement early so that people better understand the potential consequence of not acting in a responsible manner and not taking some of these rules and regulations seriously?

Kevin Purvis: Sure, absolutely. One of the examples is Chick-fil-A and the pixel tracking that I mentioned where they were showing videos on their website, but they also had a pixel tracker on that. And they’re facing significant litigation out of that. Not necessarily directed to marketing, but Amazon, as very publicly known, used a recruiting tool designed to streamline their HR process. But in the training set that they were utilizing, it was male resume heavy. And as a result, during the recruiting process, it had a bias towards males and they had immediately shut that down as soon as they realized what was happening. But, you know, these things happen to large public companies, but they also happen to, you know, smaller and mid-size private businesses on a regular basis. Go ahead.

Tessa Burg: I was gonna say, and I think the key is knowing when we say responsible use is that it encapsulates do people understand how evaluate outputs for bias? Do you understand where the data came from and the quality of that data? And do you understand your rights to the output, copyright of that output? Do you own it? Does the machine which generates it own it? So we’re talking about like make sure people understand how to be safe and responsible, but there’s quite a few different lanes and I really like that those examples are two different examples and it also speaks to why you need to collaborate with different people at the leadership level because it even spans different domains of expertise.

Kevin Purvis: Absolutely.

Tessa Burg: So let’s talk about how this is just gonna become more important and riskier as we move forward. When we look at the future, what are the additional AI risks that we should be aware of?

Kevin Purvis: Yeah, you know, I’m a big proponent of AI and what it’s going to be able to do for organizations and for the future. But if you build a house, there’s a risk of fire. You know, it’s out there. That doesn’t mean we’re not building houses. Houses are wonderful things, but then we go out and we have the insurance, right? So we just need to be aware of the risks that are out there. But I am excited about the AI future. AI bridges a gap between what we have in our industry, two different insurances. We have a technology errors and emissions typically, which addresses when your software doesn’t work right. You know, in accounting software, that messes up the numbers, causes financial harm to someone. That’s a pretty straightforward risk right there. And then you have media liability, which addresses a lot more of the intellectual-property-oriented risk, you know, the copyright infringement and so on along those lines. And AI is bridging the two of these. And so, you know, how do you address that risk there? There’s also some other policies out there that address different risks such as bias and discrimination in an employment practices liability policy that could be as a result of, you know, inappropriate hiring practices or it could even infect your customers and those policies could respond. And because of that, insurers try to avoid a duplication of coverage. And so an errors and emissions policy has exclusions for bias and discrimination. It has exclusions for intellectual property infringement. It has exclusions for regulatory violations. So how do you protect against those if you’re utilizing AI services? And that’s something that you have to work on an individual basis with your broker to make sure that if you need a media liability policy and you need a technology or emissions policy or not, are those dovetailed together? It changes dramatically if you are, you know, a marketing firm that’s then utilizing these services for your clients. Or are you just a, you know, you’re a manufacturer or a retailer or a restaurant group and then you’re using services provided by others. Those are gonna change your needs and, you know, marketers are gonna need a more robust insurance program than possibly a manufacturer of products is gonna need.

Tessa Burg: Well, Kevin, this has been some very helpful information and I hope that marketers take it seriously, but also to your point, are excited about what is possible in the future when we have these guardrails in place. If listeners want to reach out to you and learn more about, you know, if they’re covered, better understand what they can be doing in their organization to decrease their risk and manage it better, where can they find you?

Kevin Purvis: Sure. Again, my name is Kevin Purvis. That’s P as in Paul, U-R-V as in Victor, I-S as in Sam. And we’re at Cothrom Risk. Cothrom is C-O-T-H-R-O-M.com, cothrom.com. We’re pretty easy to get ahold of. And my number is 312-5407. 312-5407.

Tessa Burg: Awesome. And before we go, any closing thoughts or anything that we missed in this interview that you want to maybe make a prediction about 2025 and risk or leave us with a last word of advice as we look forward to this new year?

Kevin Purvis: Oh, I’m excited for the next generations of the ChatGPTs and other large language models. They’re gonna continue to see explosive growth and their use capabilities are going to expand dramatically. You know, the only real downside I think at this point in time is the energy consumption. You know, can they figure out how to address the energy consumption of them, but the gross and the continued use is just gonna be, it’s gonna be fun to watch.

Tessa Burg: Yeah, I agree. We are right now looking at how we increase our adoption of large language models and the agency, like business unit by business unit, but with limitations like are we going to, like on free versions right now, there’s already limits you on the number of prompts and really starting to be intentional about the value of use in certain types of prompts. And the energy thing, like, quite honestly, like, really freaks me out. Like, I know there’s a lot of companies working on it, but in the meantime, when you get really good at using ChatGPT, it’s hard not to want to use it for everything. So I think it’s a really good point. And you know, it’s something as an agency I think we’re gonna start to build into our trainings is not just, like, using AI, but how to use it in a way where we’re thinking about the value that we’re getting for the cost and not just the cost of the business, the cost to the environment.

Kevin Purvis: Yes.

Tessa Burg: Well, thank you again for joining us and I’m sure we’ll be talking to you again soon. If you want to find more episodes of “Leader Generation”, you can visit [email protected], that’s M-O-D-O-P.com and you can find us at podcast. We are also available wherever you listen to podcasts. And if you wanna find me on LinkedIn, it’s Tessa Burg, T-E-S-S-A B-U-R-G. And until next time.

Kevin Purvis: Thank you.