AI EDUCATION: What is AI Insurance?


Publisher’s Note: In this brave new world that has emerged as generative AI has become more mainstream, guess what?  The bad guys and the lawyers (I won’t lump them together!) are out there, too!  And as we have oft pointed out, AI can generate hallucinations, which is essentially incorrect information it makes up based on the way it processes available information to synopsize.  We have also shown how AI cannot spell in images, and then take that deficiency of accuracy to a whole new level in practical applications within medicine, etc.

AI can also replicate human voices, as we’ve heard in the news, and in fact, just yesterday (4/25/24), it was reported that a high school gym teacher in the Baltimore area used AI to generate a series of racist rants that he claimed were recorded from the high school’s principal.  In fact, it never happend, and the recordings were AI-generated, but there were both criminal and legal ramifications.

According to The Verge:

‘The Baltimore Banner reports that Baltimore County police believe a recording that circulated on social media in January with purported audio of Pikesville High School principal Eric Eiswert making racist and antisemitic comments was fake. Experts told The Baltimore Banner and police that the recording, which briefly resulted in Eiswert’s suspension, has a “flat tone, unusually clean background sounds, and lack of consistent breathing sounds or pauses.” ‘

For a brief time, the principal was put on leave, and you can only imagine the lawsuits that are out there now around this incident.  So – hence the need for AI insurance.  And this is just one example of why it is needed.  Here’s a synopsis of what it is, what it covers, and who offers it for your review.

What is AI Insurance?

AI insurance is a specialized form of coverage designed to mitigate the risks and liabilities associated with the use of artificial intelligence systems. As businesses increasingly rely on AI for operations, they face new challenges, including data breaches, biased decision-making, and operational failures. AI insurance helps protect companies from the financial and reputational damages these incidents can cause.

What Does AI Insurance Cover?

AI insurance policies are crafted to address a range of potential issues:

  1. Data Breach and Cyber Liability: As AI systems often process vast amounts of sensitive data, insurance can cover losses from data breaches, including legal fees, notification costs, and penalties.
  2. Errors and Omissions: This covers the legal costs and damages if the AI system’s failure or malfunction causes financial loss to a client or third party.
  3. Product Liability: If an AI-driven product fails, causing injury or damage, this coverage will protect against claims from consumers.
  4. Intellectual Property Risks: Covers disputes over the AI software’s intellectual property rights, safeguarding against infringement claims.
  5. Regulatory Compliance: With the regulatory landscape for AI still evolving, this coverage helps companies navigate potential legal hurdles and covers any associated fines or penalties.

Why is AI Insurance Necessary?

The deployment of AI systems brings not only innovation but also new liabilities:

  • Complex Legal Landscapes: AI can make decisions that lead to unforeseen legal consequences, necessitating protection against potential lawsuits.
  • Reputational Risk: Mishandling AI operations can lead to public relations crises. Insurance helps manage and mitigate negative publicity.
  • Financial Stability: AI-related mishaps can be costly. Insurance provides a financial safety net, allowing businesses to recover without devastating impacts on their financial health.

Leading Providers of AI Insurance

Several companies are at the forefront of offering AI insurance, understanding the intricacies of AI applications and the associated risks.  Below are just a few of the higher profile names offering this coverage:

  1. AXA XL: AXA XL offers tailored insurance products that cover various aspects of AI, from data protection to intellectual property, ensuring comprehensive protection for companies in the tech sector.
  2. Chubb: Known for its cyber insurance solutions, Chubb has expanded into AI-specific policies, offering robust coverage options for AI-related liabilities.
  3. Allianz: Allianz has developed AI-specific insurance solutions that cater to the unique needs of businesses employing AI technologies, emphasizing flexibility and comprehensive coverage.
  4. Travelers: Travelers offers a range of cyber liability insurance policies that are adaptable to include AI-related risks, providing a protective umbrella for companies integrating AI into their operations.


As AI continues to evolve, so too does the landscape of risks associated with its use. AI insurance is not just a protective measure; it’s a strategic investment in a company’s future, ensuring that they can leverage AI technologies while mitigating the potential risks. For businesses integrating AI into their operations, understanding and investing in AI insurance is crucial to navigate this new territory safely and successfully.


For more detailed information on AI insurance and its providers, consider exploring the following resources:

DWN Staff & ChatGPT