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AI is too risky to insure, say people whose job is insuring risk
Major U.S. insurers are seeking to exclude AI-related liabilities from policies due to the unpredictable risks associated with AI software. Cases of AI mishaps, including a $110 million lawsuit and $25 million fraud, highlight insurers' concerns about systemic risks that could lead to widespread claims following AI failures.
Key points
- Insurers like AIG, Great American, and WR Berkley are asking regulators to exclude AI-related liabilities.
- AI models are seen as 'black boxes,' leading to uncertainty in outputs.
- Notable incidents include Google's AI falsely accusing a solar company, leading to a $110 million lawsuit.
- Air Canada had to honor a discount created by its chatbot, complicating corporate liability.
- Fraud involving a digitally cloned executive resulted in a $25 million loss.
- Insurers fear systemic risk from numerous simultaneous claims triggered by AI failures.
Why it matters
- This situation reflects a broader trend in 2025 where advanced technologies such as AI pose significant risks that challenge traditional risk management.
- The conversation around AI liability parallels other emerging tech debates, such as cybersecurity risks and the insurance industry's adaptation to new technologies.
- The rise of digital fraud and AI mishaps in 2023 raises urgent questions about regulatory frameworks and insurance models in the technology landscape.
Insurers' hesitation to cover AI risks underlines a critical issue in modern business; as AI integration accelerates, the need for robust risk management strategies and regulatory clarity becomes paramount to prevent financial fallout.