Artificial intelligence (AI) is changing how businesses manage customer relationships, create content, analyze information, and streamline everyday tasks. These tools can improve efficiency, but they also introduce new questions about how business and customer information is collected, stored, shared, and used.
When employees enter information into AI tools, use website forms to collect customer details, or rely on third-party applications to manage business operations, sensitive information may be handled in ways that aren’t always obvious.
That makes data privacy an important consideration for businesses of all sizes.
A data privacy program can help your organization establish clear expectations for handling information, understand its obligations, and reduce unnecessary exposure. As technology evolves, having a structured approach to data privacy can support both responsible business practices and long-term client relationships.
Data Privacy vs. Cybersecurity: What’s the Difference?
Data privacy and cybersecurity are closely related, but they address different aspects of protecting information.
Cybersecurity focuses on protecting systems, networks, devices, and information from unauthorized access, theft, damage, and disruption. Data privacy focuses on how personal information is collected, used, stored, shared, and retained.
For example, cybersecurity measures may prevent an unauthorized person from accessing a customer database. A data privacy program helps determine what information belongs in that database, who should have access to it, how it may be used, and when it should be deleted.
Both are important components of a broader information risk management strategy.
What Is a Data Privacy Program?
A data privacy program is a set of policies, procedures, and practices designed to govern how an organization handles personal and sensitive information.
Depending on the business, this may include customer contact details, employee records, financial information, health information, or other data that requires careful handling.
A privacy program may address requirements under laws and regulations such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act (CCPA/CPRA), the European Union’s General Data Protection Regulation (GDPR), and the Health Insurance Portability and Accountability Act (HIPAA), when applicable.
The requirements vary depending on the type of information collected, the organization’s activities, and the laws that apply.
What Is a Cybersecurity Program?
A cybersecurity program establishes the safeguards an organization uses to protect its information and technology infrastructure.
Common measures include:
- Multifactor authentication (MFA) and access controls.
- Network security, encryption, and secure data storage.
- Employee cybersecurity awareness training.
- Software updates and vulnerability management.
- System monitoring and security assessments.
- Incident response procedures for suspected or confirmed security events.
Cybersecurity helps protect information from unauthorized access and other threats. Data privacy helps ensure information is handled appropriately throughout its lifecycle.
A business may have strong technical safeguards but still collect more personal information than necessary or share it with third parties without adequately evaluating the implications. A coordinated approach addresses both concerns.
Why Data Privacy Matters to Your Clients
Customers, employees, and business partners trust organizations to handle their information responsibly. How that information is collected and used can affect relationships, reputation, and confidence in your business.
A privacy incident may also create financial and operational consequences. Depending on the circumstances, an organization could face investigation costs, legal expenses, regulatory action, contractual disputes, notification obligations, or reputational damage.
Privacy obligations aren’t limited to large corporations. Smaller businesses may collect personal information through website contact forms, email marketing campaigns, online transactions, employee records, and third-party software.
Even when a specific privacy law doesn’t apply, responsible data handling remains an important business practice.
A well-designed privacy program can help your organization:
- Understand what personal and sensitive information it holds.
- Establish consistent practices for collecting and using information.
- Limit access to information based on job responsibilities.
- Evaluate how vendors and technology providers handle data.
- Support applicable legal and contractual obligations.
- Demonstrate a thoughtful approach to protecting customer and employee information.
Privacy practices can also support client confidence by making your organization’s approach to information handling more transparent.
Does Your Business Need a Data Privacy Program?
The scope of your program should reflect the type of information you handle, how you use it, your business operations, and your applicable legal and contractual obligations. You don’t necessarily need a large, complex program to start making improvements.
Begin by evaluating how your business collects, processes, stores, and shares information.
Consider these questions:
- Do you collect information through your website? Contact forms, newsletter subscriptions, online registrations, and lead-generation campaigns may collect personal information that needs to be handled appropriately.
- Do employees use AI tools? Applications used to draft emails, summarize documents, analyze information, or create content may process information entered by employees. Review the tool’s data handling practices and establish clear rules for what employees may submit.
- Do you use third-party applications? CRM platforms, marketing tools, cloud storage, and other software providers may store or process information on your organization’s behalf.
- Do you collect sensitive information? Financial details, government-issued identification numbers, health information, and certain employee records may require additional safeguards.
- Do you share information with outside parties? Vendors, service providers, business partners, and marketing platforms may receive information as part of normal operations.
- Do you have a retention policy? Keeping information longer than necessary can increase exposure. Determine how long records should be retained and how they should be securely disposed of when no longer needed.
These questions can help identify where your business may need clearer procedures, stronger safeguards, or a more detailed review.
AI Is Adding New Data Privacy Considerations
AI tools can help businesses work more efficiently, but their use introduces questions about information handling, access, and oversight.
For example, an employee might upload a customer document to an AI application to generate a summary. Depending on the tool and its configuration, that information may be processed or retained according to the provider’s terms and settings.
Before adopting an AI tool, consider the following:
- Review how data is used. Understand what information the tool collects, how it is processed, whether it is retained, and whether it may be used to improve or train AI models.
- Limit sensitive information. Avoid entering confidential business information, personal data, or customer records unless the tool has been appropriately evaluated and the use is authorized.
- Establish acceptable-use guidelines. Give employees clear instructions about approved tools, prohibited information, and when human review is required.
- Evaluate access and security controls. Look for appropriate authentication, administrative controls, logging, and data protection features.
- Review third-party providers. Understand how the vendor handles information and what contractual protections are available.
- Monitor changes. AI tools and their terms can change. Revisit approved applications and usage guidelines periodically.
Two useful concepts are Privacy by Design and Secure by Design. Privacy by Design incorporates privacy considerations into systems and processes from the beginning. Secure by Design emphasizes building and maintaining products with security as a core consideration rather than an afterthought.
These principles can inform technology purchasing decisions and internal procedures. They don’t replace the need to evaluate each tool, its configuration, and its suitability for your business.
Key Elements of a Data Privacy Program
An effective privacy program doesn’t have to be overly complicated, but it should provide a consistent framework for managing information.
Depending on your organization’s size and risk profile, consider incorporating the following elements:
1. Data inventory and assessment
Identify the types of personal and sensitive information your business collects, where it is stored, who can access it, and with whom it is shared. Review whether each category of information is necessary for your business activities.
2. Written policies and procedures
Establish guidelines for collecting, using, sharing, retaining, and disposing of information. Include expectations for employee use of AI tools and other third-party applications where appropriate.
3. Access controls and safeguards
Limit access to information according to job responsibilities. Use appropriate authentication, secure storage, encryption, and other safeguards based on the sensitivity of the information and the risks involved.
4. Employee training and awareness
Employees play an important role in protecting information. Provide practical guidance on recognizing suspicious requests, handling sensitive documents, using approved technology, and reporting potential privacy concerns.
5. Vendor and technology reviews
Evaluate how outside providers collect, store, process, and protect information. Consider contractual requirements, access permissions, security practices, and the type of data each provider receives.
6. Incident response procedures
Establish a process for responding to suspected data exposure or inappropriate information sharing. Coordinate privacy response procedures with your cybersecurity incident response plan and understand when legal, regulatory, contractual, or notification requirements may apply.
7. Ongoing review and improvement
Reassess your program as your business changes, new technology is introduced, regulations evolve, or new risks emerge. Assign responsibility for reviewing policies and addressing identified gaps.
Depending on the complexity of your operations, outside legal counsel, privacy professionals, or cybersecurity specialists may be helpful in evaluating your program.
How Does Data Privacy Relate to Cyber Insurance?
Data privacy and cybersecurity also have implications for your organization’s insurance program.
Cyber insurance may provide coverage for certain costs associated with covered cyber incidents, subject to the policy’s terms, conditions, limits, and exclusions. Depending on the policy, coverage may address expenses such as incident response, forensic investigations, legal assistance, notification costs, and certain third-party claims.
However, not every privacy issue or regulatory matter is covered, and coverage varies by insurer and policy. A privacy compliance failure, for example, does not automatically trigger insurance coverage.
Businesses should understand what their cyber policy covers, which events or expenses may be excluded, and what requirements apply when responding to an incident.
A data privacy program and cyber insurance serve different purposes. Privacy practices help establish how information is managed, cybersecurity controls help protect it, and insurance may help address certain financial consequences of covered incidents.
Together, these measures can form part of a broader risk management strategy.
Make Data Privacy Part of Your Risk Management Strategy
As businesses adopt new technologies and manage increasing amounts of information, data privacy deserves attention alongside cybersecurity, vendor management, and operational planning.
A practical starting point is to understand what information your organization holds, why it needs that information, who can access it, and how it is protected. From there, you can prioritize improvements based on your operations and potential exposures.
At Bender Insurance Solutions, we believe proactive risk management involves looking beyond immediate concerns to identify potential vulnerabilities and make informed decisions about protecting your business.
Reviewing your data privacy practices, establishing clear employee guidelines, and evaluating your cyber insurance program can help you take a more coordinated approach to managing information-related risks.
The goal isn’t to eliminate every possible risk. It’s to understand your exposures, establish appropriate safeguards, and prepare your business to respond when challenges arise.
This article is intended for informational purposes only and should not be interpreted as insurance, legal, or risk management advice.
