Navigating AI Exclusions in Insurance: Strategies for Protection
As the insurance renewal season draws near, professionals in the industry are noting an increase in AI-driven prior authorization delays and exclusions across various insurance policies. Insurers are responding to the complexities and risks associated with AI technologies, such as voice mimicry and enhanced deepfake videos. Recent legal cases involving AI-driven errors highlight liabilities tied to AI tools in professional services.
Insurers are rapidly implementing measures to mitigate potential AI-related claims. This includes introducing model forms that address generative AI and rolling out comprehensive AI exclusions. For businesses heavily reliant on AI technologies, these exclusions could result in significant coverage gaps, impacting their risk management strategies.
AI Exclusion Patterns and Implications
This approach by insurers mirrors past patterns seen with emerging risks like Covid-19 or cryptocurrencies, where broad, initial exclusions were common. Over time, these may become more refined, but initially, they often encompass undefined terms with the potential to broadly deny claims indirectly connected.
With AI influencing various business operations, including development, marketing, and support, the threat to comprehensive insurance coverage is significant. AI exclusions affect different policy types, such as Directors and Officers (D&O) and Errors and Omissions (E&O) policies, raising concerns for both providers and carriers.
Strategic Steps for Navigating AI Exclusions
Insurance professionals should advise policyholders on key steps to protect their interests. Engaging with insurers proactively to negotiate policy terms during renewals is essential. Negotiations should focus on obtaining precise definitions, specific exclusions, and allowances that align with a business’s risk profile and regulatory compliance requirements.
Understanding and documenting the use of AI technologies within operations is crucial. Accurate reporting of how AI is integrated into business activities can prevent potential disputes over coverage. Insurers will likely probe deeper into these integrations, underscoring the importance of thorough documentation.
If broad AI exclusions are unavoidable, professionals should prepare for possible coverage refusals. Legal standards, which dictate that exclusionary language must be interpreted narrowly, can be leveraged to challenge denials when exclusions appear to negate a policy's intended coverage. Collaboration with legal counsel experienced in underwriting coverage matters is advised to address potential cases of insurer overextension.
As AI-related exclusions expand rapidly, policyholders must align their coverage with operational risks. Immediate action and strategic planning are vital to ensure robust insurance protection that aligns with evolving AI risks, regulatory compliance, and industry standards.