Insurers Nervous as AI Risks Increase
As the rush to adopt AI technology continues, a new concern is emerging – the risk associated with insuring these technologies. According to a recent report from the Financial Times, major insurers such as AIG, Great American, and WR Berkley are seeking permission from U.S. regulators to exclude AI-related liabilities from corporate policies. One underwriter expressed concern that AI models’ outputs are too much of a “black box.”
The insurance industry’s apprehension is not unfounded. In a recent incident, Google’s AI Overview incorrectly accused a solar company of legal issues, leading to a $110 million lawsuit in March. Air Canada also faced a dilemma when its chatbot created a discount that the company had to honor. Additionally, fraudsters successfully used a digitally cloned version of a senior executive to steal $25 million from a design engineering firm during a video call that appeared authentic.
What truly scares insurers is not a single large payout, but the potential for numerous claims simultaneously due to a widespread AI model failure. An Aon executive explained that insurers can manage a $400 million loss to one company, but they are ill-equipped to handle a scenario where an AI mishap results in 10,000 losses at once.
