Document Type

Article

Disciplines

Insurance Law

Abstract

Insurance represents an important but underappreciated part of our lives. Both individuals and corporations gain from purchasing coverage from insurers to manage and hedge their risks. It is a necessary mechanism in modern society to support innovation while ensuring that its unavoidable victims will be compensated. The innovation of emerging technologies alters the existing risk landscape, challenging insurance companies, innovators, and individuals' ability to manage their risks. The current emerging technology of Artificial Intelligence (Al) significantly emphasizes this trend. Insurance companies are grappling with the notion of Al. They are exploring different traditional and novel insurance products that they can offer both corporations and users to manage the risks associated with AI. In return, the market for AI coverage presents unprecedented growth and revenue opportunities. Insurance is set to play a pivotal role in AI's development and distribution, actively shaping risk mitigation strategies and regulatory frameworks for AI users and companies. This is not just an academic gap - it is a pressing regulatory issue with tangible, real-world implications. This paper examines the intersection of AI and insurance from an empirical perspective. It presents empirical findings from the insurance sector, delving into the operational dynamics of liability policies covering risks associated with AI. Through in-depth interviews with key industry stakeholders, including underwriters, brokers, and AI users navigating the uncharted risks AI presents, this paper offers a deeper understanding of three crucial questions. First, is there a need for a specialized AI insurance policy, and how should underwriting adapt to AI's unpredictable risks? Second, do existing liability policies, such as cyber insurance and product liability, adequately cover AI-related risks, or do they leave dangerous gaps that could expose both insurers and policyholders (known as "silent AI')? Third, what role should legislators play in crafting policies that equitably manage AI risks for all stakeholders? The findings reveal a rapidly evolving insurance market where underwriters, brokers, and AI users recognize the deep connection between anticipated AI regulation, substantial financial penalties, and the emergence of  an AI-specific insurance sector. Bridging theory with practical applications is pivotal in academic and theoretical writing. This holds particular significance in the insurance realm, impacting AI users and innovators. Collaboration is necessary between those who discuss insurance for AI from a legal perspective and those who underwrite AI policies from an actuarial perspective, as new AI regulations and litigation are likely to create a new insurance market for AI.

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