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How AI is Changing Insurance: Risks, Coverage Challenges, and Industry Adaptation

Posted on February 14, 2025February 14, 2025 By Martin Hinton

It’s not a new thought. But anything this profound needs ongoing coverage and consideration. Artificial intelligence (AI) is reshaping the world, and it is only just the beginning. The AI insurance risks to the industry are no exception. That is raising concerns about risk exposure and policy coverage.

A new blog, Woodruff Sawyer, is the most recent thing we’ve seen on the matter, and it has some interesting elements we wanted to touch on. In sum, companies integrating AI must assess its effects on property, casualty, cyber, and directors and officers (D&O) insurance.

Here are some more of our takeaways. You can read it all here.

Woodruff Sawyer logo featuring a green shield with "WS" initials and the company name in green text.
Cyber Insurance Challenges

Like a lot of tools, AI is both a cybersecurity asset and a threat. It enhances cybercriminals’ attack methods while improving defense mechanisms. I-related privacy concerns are rising, particularly regarding personally identifiable information (PII). Technology errors & omissions (E&O) claims are increasing. This leads to higher premiums as well as reduced coverage options.

AI’s Effect on Property & Casualty Insurance

AI can increase risks and liability. This is particularly concerning when the tecnhollogy is integrated into consumer products or building operations. Malfunctions could lead to property damage or injury, affecting coverage. Standard policies may address these incidents unless insurers impose exclusions.

D&O Insurance Risks

AI hype has inflated valuations the way the new thing often does. The result is an increasing likelihood of securities class actions if companies fail to achieve expected valuations. Regulatory scrutiny and potential penalties add to D&O risks. Companies must review policies to ensure protection against derivative claims, which hold directors financially liable.

Considerations for Businesses
  • Evaluate AI-related exposures and adjust coverage accordingly.
  • Policy language: AI-related exclusions, and what are the negotiated terms to prevent coverage gaps?
  • Insurers are scrutinizing AI governance, requiring businesses to document oversight and compliance measures.

Other News: Coalition Touts New AI Tools for Cyber Insurance (Opens in a new browser tab)

Martin Hinton

Martin Hinton is the Executive Editor and Publisher of Cyber Insurance News and Information. With over three decades of journalism experience across six continents, his work encompasses investigative reporting, documentaries, and coverage of cultural, political, and business news. To learn more about his career, click on his name to visit his LinkedIn page.

AI & Cyber Insurance, Cyber Insurance Tags:AI coverage, AI cybersecurity, AI governance, AI insurance, AI insurance impact, AI liability, AI risk, AI risk management, cyber insurance, cyber liability insurance, Cybersecurity, D&O insurance, insurance exclusions, Insurance Industry Trends, insurance policy changes, liability coverage, Technology E&O

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