What will happen if the software that everyone is eager to implement becomes so hazardous that insurers refuse to cover it? Reporting from the Financial Times suggests we are on the verge of discovering the answer.
Leading insurance providers such as AIG, Great American, and WR Berkley are seeking approval from U.S. regulators to remove coverage for AI-related risks from business insurance policies. One underwriter told the FT that the results produced by AI models are “far too much of a black box.”
The article points out that the insurance sector has valid reasons for concern. For example, Google’s AI Overview wrongly accused a solar company of legal issues, which led to a $110 million lawsuit in March. Last year, Air Canada was forced to honor a discount that its chatbot had fabricated. Additionally, in another incident, scammers used an AI-generated replica of a senior executive to steal $25 million from the London-based engineering firm Arup during a convincingly realistic video call.
What truly unsettles insurers is not a single enormous claim, but the potential for widespread losses if a popular AI model fails and thousands of claims are filed at once. As an executive from Aon explained, insurers are equipped to manage a $400 million loss from one client, but they are not prepared for a scenario where an autonomous AI error results in 10,000 simultaneous claims.
