Insurers Adapt to the Rise of AI-Related Risks

The increasing integration of artificial intelligence (AI) into business operations has prompted insurers to reevaluate their policy wordings and coverage options. According to DAC Beachcroft, the term "silent AI" refers to risks associated with AI that are neither explicitly included nor excluded in insurance policies. This ambiguity can lead to disputes when claims arise. Insurers are under pressure from buyers and brokers to clarify whether their policies cover AI-related losses, with expectations for more explicit language in future products. As AI systems evolve, particularly those that operate autonomously, insurers are also reassessing their reinsurance protections to ensure they are adequately covered against potential claims.

Insurers race to tackle “silent AI” exposures with new wordings, productsInsurers move to ring-fence AI liability as systemic failure fears riseCharting the course for AI in claims: 6 key areas where insurers can find valueUS insurers add generative AI exclusions as regulators approve new forms

Recent filings from major U.S. insurers, including AIG and National Union Fire Insurance Company, indicate a trend toward incorporating exclusions related to generative AI in their policies. For instance, National Union's new endorsements exclude coverage for bodily injury and property damage linked to generative AI use. These changes reflect a growing recognition of the risks posed by AI technologies, as insurers seek to limit their exposure to potential claims arising from AI failures. Regulators have approved these filings, suggesting a shift in the underwriting landscape as AI-related risks become more prominent.

US insurers add generative AI exclusions as regulators approve new formsInsurers race to tackle “silent AI” exposures with new wordings, productsInsurers move to ring-fence AI liability as systemic failure fears riseCharting the course for AI in claims: 6 key areas where insurers can find value

Insurers are actively seeking to "ring-fence" their liabilities associated with AI systems. AIG, WR Berkley, and Great American have proposed exclusions that would allow them to deny claims related to any use of AI, including chatbots and automated systems. This move is driven by concerns over systemic risks, as high-profile incidents involving AI errors have raised alarms about the potential for widespread losses. For example, Google faced a significant defamation lawsuit due to inaccuracies generated by its AI, highlighting the unpredictable nature of these technologies.

Insurers move to ring-fence AI liability as systemic failure fears rise

Despite the challenges posed by AI, the technology also offers significant opportunities for insurers to enhance their claims processes. Tom Helm, Global Head of Claims at WTW, notes that AI can improve fraud detection, optimize claims triage, and enhance customer experience. By leveraging predictive analytics, insurers can make more informed decisions and allocate resources more effectively. The integration of AI into claims operations is seen as a way to streamline processes, reduce costs, and ultimately improve customer satisfaction.

Charting the course for AI in claims: 6 key areas where insurers can find valueInsurers race to tackle “silent AI” exposures with new wordings, productsInsurers move to ring-fence AI liability as systemic failure fears rise

Critics argue that the rapid adoption of AI in insurance may outpace regulatory frameworks, leaving insurers vulnerable to unforeseen liabilities. The lack of established guidelines for self-learning systems complicates accountability and transparency, raising ethical concerns about data protection and potential misuse. Furthermore, some insurers, like Mosaic Insurance, remain hesitant to underwrite risks associated with large language models, citing their unpredictable nature.

Insurers race to tackle “silent AI” exposures with new wordings, products

As the insurance industry grapples with the implications of AI, companies must navigate a complex landscape of evolving regulations and emerging risks. Insurers are increasingly recognizing that the responsibility for AI-related risks may rest more heavily on their balance sheets than previously anticipated. With ongoing developments in policy language and coverage options, the industry is poised for significant transformation as it adapts to the challenges and opportunities presented by artificial intelligence.

Insurers race to tackle “silent AI” exposures with new wordings, products