Major insurance carriers are reassessing their policies concerning companies that use artificial intelligence (AI) for internal processes. This shift comes as insurers grapple with the complexities and risks associated with AI-generated outputs, particularly in cybersecurity and errors and omissions (E&O) coverage. As a result, some carriers are declining to insure AI-related claims, while others are increasing premiums to account for the perceived higher risk.
The reluctance to cover AI outputs stems from the difficulty in tracking the reasoning paths of AI systems, which makes it challenging for insurers to assess and manage risks. This issue first gained attention in November 2025 when major carriers like AIG, Great American, and W.R. Berkley sought regulatory approval to exclude AI-related liabilities from their policies. Now, many carriers are actively moving to limit or exclude coverage for AI-related business disruptions and liabilities.
Despite these challenges, insurance carriers continue to use AI for their internal purposes, highlighting a paradox in their approach to AI. The industry is seeing a bifurcation in how AI is treated, with governed AI systems being more insurable compared to experimental AI projects. Insurers are increasingly scrutinizing how companies use AI, asking detailed questions about AI policies and procedures to better understand the risks involved.
The impact of these changes is significant, as businesses across various sectors rely on AI to some extent. Companies may face difficulties in obtaining insurance for AI workloads, and those that do may encounter higher costs. Insurers are also differentiating between AI vendors and users, often declining to cover the former while carving out exceptions for the latter.
For businesses seeking insurance coverage for AI-related activities, transparency is key. Companies should be upfront about their AI usage and governance practices to avoid potential claim rejections. Failing to disclose AI risks could lead to denied claims, as insurers may argue that they were not adequately informed about the risks they were underwriting. Therefore, clear communication with insurers about AI practices is essential to securing appropriate coverage.
Source: https://www.csoonline.com/article/4159292/insurance-carriers-quietly-back-away-from-covering-ai-outputs.html