Insurance companies are facing a dilemma as they grapple with the risks associated with insuring AI technology. Recent reports from the Financial Times indicate that major insurers such as AIG, Great American, and WR Berkley are seeking regulatory approval to exclude AI-related liabilities from their policies. One underwriter expressed concerns about the opacity of AI models, labeling them as “too much of a black box.”
AI technology poses significant challenges for insurers, as highlighted by recent incidents. For example, Google’s AI Overview wrongly implicated a solar company in legal issues, resulting in a $110 million lawsuit earlier this year. Similarly, Air Canada faced a dilemma when its chatbot offered a discount that the company had to honor. Additionally, fraudsters utilized a deepfake of a senior executive to steal $25 million from a design engineering firm during a seemingly authentic video call.
What truly worries insurers is not just the prospect of a single large payout but the potential for widespread claims stemming from a malfunctioning AI model. Aon executive emphasized that while insurers can manage a $400 million loss to a single entity, they are ill-equipped to handle a scenario where numerous losses occur simultaneously due to an AI error.
