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Tech E&O, cyber coverage most likely to pay AI-related claims

Posted On: Apr. 1, 2019 12:00 AM CST

Organizations developing or using artificial intelligence should examine their insurance coverages to see which policies could come into play in the event of a claim, experts say.

When artificial intelligence fails to perform as expected, several different insurance coverages may respond, 
including technology errors and omissions and cyber policies, they say.

“A lot of the risk sits on the technology errors and omissions side for the organizations or companies that are providing this technology,” said David Derigiotis, Detroit-based professional liability and cyber risk practice leader with Burns & Wilcox Ltd.

When evaluating AI risks, insurers are closely scrutinizing the companies providing the technology, how the technology was created, how it is being deployed and the revenues generated by the service or the product, Mr. Derigiotis said.

Interest in coverage for AI risks has been increasing, especially among companies creating AI technology applications.

“Whether it’s a company that’s evaluating lab results or a company developing surveillance technology or facial recognition, or an organization that is collecting data, those are the companies we are seeing that are concerned about their exposure and what their liability could be,” he said.

For health care organizations that provide a variety of medical services, for example, it’s important to have the right regulatory coverage built into cyber privacy policies, he said. From a professional liability standpoint, “you also want to make sure the coverage extends to any of the services the company is promoting or providing, such as lab result evaluation.”

In the case of autonomous vehicles, if a crash happens because of the failure or malfunction of a car’s AI system, it may be difficult to establish fault so the liability risk for auto manufacturers is changing, experts say.

“If an autonomous vehicle causes an accident, is it the fault of the manufacturer or the vendor who gave them the software or the chip manufacturer? It’s a very complex subject to determine who exactly is at fault,” said Asha Vellaikal, head of Marsh Digital Labs, a technology-focused division of Marsh LLC in San Francisco.

Ultimately, the insurance industry may become more driven by AI and risk mitigation than it is by the sale of insurance, said Eric Boyum, national practice leader, technology for Aon PLC.

“Now that technology is driving new ways in which risk is being realized, we may be on the cusp of a sea change in what our industry does,” Mr. Boyum said.

“So far, our industry has sold insurance because people don’t want to realize the financial consequences of the risk. There are more ways to reduce their total costs of risk than just doing it with insurance,” he said.