Underwriters should be on alert for unwitting exposure to claims stemming from inaccuracies caused by artificial intelligence, an insurance lawyer says.  

AI could be “even more pervasive than cyber in terms of where it can impact policies”, Clyde & Co partner Darryl Smith says.

“The key concern in my mind is just inaccuracy really – inaccuracy in what the AI produces.”

Swiss Re has previously likened “silent AI” to “silent cyber”, when insurers sustained large losses because ransomware attacks and other cyber risks were covered by non-cyber policies, even though that was not the intention.

Mr Smith says policy proposal and renewal forms should ask if, where and why AI is being used.

“It has the capacity to impact a lot of different types of policies, but if insurers start looking at it now, it’s something that’s more than capable of being addressed,” he told insuranceNEWS.com.au.

“At least we’ve got a road map from silent cyber in terms of how to move forward. You can look at exclusions – which is probably not very palatable to your policyholders – or see an opportunity for a different cover. In cyber, that started with sublimited covers.”

AI is increasingly used in professional services, but Mr Smith says it is not always correct even though it is relied on to deliver advice.

“Down the track, we’re looking at having some serious problems, basically the next silent cyber.”

Professional indemnity and errors and omissions policies are vulnerable, with potential for years to pass before mistakes are discovered, which may increase the severity of claims.

“The cause of the loss is the AI, but it’s just a claim for an error or an omission or an inaccuracy,” Mr Smith said.

Claims may also be made under directors’ and officers’ policies for infringement of intellectual property, defamation or incorrect use of personal information, and casualty losses and property damage are also possible.

Mr Smith says that eventually, a standalone AI policy market may emerge.

“The historical example is asbestos ... there’s not $1 of premium written for asbestos, but it costs insurers a large amount of money. It was the same with silent cyber – you’re writing the insurance but you’re not collecting the premium.  

“That’s where AI sits. It’s something many, many organisations are integrating as part of their business ... and any errors within it could lead to claims.”

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