As artificial intelligence (AI) capabilities evolve at a record pace, so do the associated risks, including regulatory compliance, and liability and reputational risk in the event algorithmic decision-making triggers unintended and potentially harmful consequences.


There are currently few insurance products that provide coverage for the algorithmic risks associated with AI developments. However, the insurance industry is beginning to understand the unique risks and design coverage to address them.



Product Liability is the most prominent area of exposure for AI, with the risk of communication errors between two machines or the machine and the interface, resulting in product defects. However, a recent report from Zurich draws attention to the challenges of allocating legal liability for AI systems due to factors such as identifying causation and existing legal liability regimes.

In some cases, the business interruption risks associated with unstable AI systems may be covered by existing Business Interruption policies. Errors and Omissions insurance offers Professional Liability coverage that may be appropriate for AI systems and would typically be implemented alongside specialised risk management services. Cyber Insurance is also an extremely important consideration as businesses rely more on emerging technologies such as AI to perform critical tasks. AI systems are common targets of ransomware attacks, and some incidents can leave a business unable to operate. 

The Zurich report discusses an insurance product for companies developing AI systems that provides compensation against underperformance. Similar to a parametric insurance product whereby the insurer analyses the AI system and insures its performance based on a set of KPIs, this product enables users to deploy the AI system at scale with confidence across the business. In the event of potential system underperformance (e.g., specific output parameters are out of range of valid and acceptable outcomes), the AI system user is indemnified.



As a member of TechAssure, a global technology-focused risk association, Honan has access to leading insurance products for emerging risks associated with artificial intelligence (AI).

AI algorithmic risks vary across businesses and so do the solutions. There are specific risk management services insurers can offer to large corporates, as well as small to medium-sized enterprises. To find out more, please reach out to your broker.


Brad Tymmons

Group Head of Client Engagement 


Trent Woodward

Head of Health & Medical


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