AI Insurance: Carriers Backing Away from AI Coverage

We’ve blogged several times about issues associated with insurance coverage AI-related liabilities and have noted the need for risk managers need to keep a close watch on their insurance policies in order to ensure adequate coverage.  According to a recent CIO.com article, that job is getting harder, because insurers are increasingly backing away from covering AI workflows in their cybersecurity and E&O policies. Here’s an excerpt:

Several major insurance carriers have begun to back away from providing cybersecurity and other insurance to companies using AI to run internal processes, insiders say.

While there’s no standard response to customer use of AI in the insurance market, many carriers are now quietly declining to write policies for claims related to AI-generated outputs in cybersecurity and errors and omissions (E&O) coverage, these observers say. Other insurance carriers are jacking up prices to cover AI-related claims, they say.

Dozens of insurance carriers appear to be rethinking coverage for mistakes related to AI, says Connor Deeks, CEO of Codestrap, an AI development and consulting firm that works with insurance firms.

Many insurance companies aren’t comfortable with covering AI outputs because they can’t track the reasoning path the AI took to come up with a result, he says.

The article says that the first rumblings of discontent among insurers surfaced late last year, when three major carriers filed requests with US regulators to offer policies that excluded liabilities related to AI chatbots and agents.  Since then, several carriers have begun writing policies that exclude AI related coverage or that build in rate increases to address it. Carriers are also differentiating between AI vendors and those companies that merely use the technology.  The article says that AI vendors may find carriers declining to offer them coverage, while companies simply using the technology may find themselves dealing with exclusions and exemptions in the policies carriers are willing to issue.