How Does AI Impact Your Insurance Coverage?

As AI begins impacting our daily lives and business operations, problems inevitably arise, resulting in legally actionable harms. When they do, an important question arises: Does my insurance policy cover this? That answer may vary as insurers carve out AI-related exclusions and offer new AI-related products. A recent memo from Stoel Rives dives deep into how AI is impacting insurance coverage and offers this piece of advice to companies using AI in their operations:

“The net take-away for companies investing in AI-enabled technologies will sound familiar to anyone who’s lived through several rounds of the ‘big new thing’ phenomenon: read your policies (all of them); coordinate risk management with product development and IT early – not after the deal is done; and finally – pay attention to risk scenarios that could come out of AI use, and talk to your lawyer (and, perhaps, broker) about insuring against those.”

It’s not just AI-related coverage changing the insurance markets. The memo also discusses how insurers are using AI themselves. Some insurance firms are using AI to make coverage and underwriting decisions. Though this practice has proven controversial and has led to litigation. Additionally, in the future, insurers may incentivize customers to use AI. The memo notes that systems like automatic sprinklers currently provide policyholders with lower deductibles. Moving forward, we could see similar incentives for the integration of AI-powered EHS monitoring systems, which have the potential to be more vigilant than humans. On the whole, AI is changing how risks manifest, and the insurance industry is adapting to meet that change.