General counsel should start considering dedicated AI insurance to protect their company’s exposure to AI-related risks amid a surge in incidents, according to consultancy Gartner.
The AI Incident Database – a website set up by the Responsible AI Collaborative to track AI-related harms or near harms – revealed a 47% year on year increase in AI-related incidents by mid-July last year, while a separate Gartner survey found that about 29% of companies had experienced an attack on enterprise generative AI application infrastructure.
GCs may need to take out dedicated AI insurance to cover for risks that are excluded from traditional insurance policies. These may include the risk of AI hallucinations and errors resulting in financial losses, or covering legal defence or settlements if algorithmic bias or discrimination in an AI model inadvertently discriminates against someone or groups of people in a business or hiring decision.
AI insurance can also cover areas such as IP and copyright infringement related to model training or even performance guarantees if AI models don’t meet certain performance metrics, such as accuracy or fairness, Gartner says.
At the more extreme end, Gartner is predicting ‘death by AI’ legal claims owing to AI safety failures will exceed 2,000 globally by the end of this year.
Alissa Lugo, senior director analyst in Gartner’s legal and compliance practice, said: “As AI incidents surge and insurers increasingly add AI exclusions to traditional policies, companies face growing exposure to legal, financial and regulatory fallout from algorithmic failures. General counsel should be evaluating a new wave of ‘affirmative AI insurance’ offerings that provide targeted coverage for risks, such as hallucinations, bias, IP infringement and safety failures.”
Gartner says to adopt AI at scale in a responsible way, legal leaders need to understand the financial, operational and legal implications of dedicated AI insurance to manage risks stemming from AI failures.
She added: “Currently, AI risk is not sufficiently addressed through the combination of internal risk management practices and traditional business owners’ insurance policies, which could lead to large financial losses or brand injury. General counsel need to be thinking carefully about how their organisations will be covered in the event of AI-related legal claims.”
A report published in March by cybersecurity audit business Thoropass found that organisations in the US are adopting AI at a faster rate than compliance can keep up, exposing them to potential regulatory risks.
That followed a report earlier in March from Womble Bond Dickinson that companies are adopting AI without fully understanding the operational and legal impacts.
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