insurance2 articles
Nobody Wants to Insure Your AI Disaster: The Coverage Gap Nobody Planned For
The insurance industry is growing increasingly wary of covering AI-related corporate liability, as harms such as deepfakes, misinformation, privacy violations, and discriminatory decisions don't fit neatly within existing insurance frameworks. Some insurers, like W. R. Berkley, are introducing explicit AI exclusions, while standardized policy language excluding generative AI harms is being adopted across a large portion of US property and casualty policies. RAND argues that developing a common taxonomy for AI incidents and clearer coverage notices are needed, and expects AI insurance to mature over time — but the current uncertainty could slow enterprise AI adoption.
Generative AI is reshaping catastrophe modelling, but physics violations and commercial incentives could undermine the whole thing
Insurers are increasingly using generative AI, particularly diffusion models, to produce more precise catastrophe risk assessments by synthetically generating vast numbers of weather scenarios and sharpening spatial resolution beyond what traditional physics-based models can achieve. However, the technology carries risks, including AI "hallucinations" that can produce physically implausible events. Even where the science improves, there is a commercial tension, as insurers may favour models that produce lower loss estimates to justify writing more business rather than those that most accurately reflect risk.