Insurers face AI liability issue

Artificial Intelligence (AI) agents will take over many decisions from humans in future, but they cannot legally be held liable for those decisions, creating new liability challenges to the insurance industry, according to a new report by Allianz.

Chatbots, autonomous vehicles, and connected machines in digital factories foreshadow what the future will look like driven by a widespread implementation of AI applications.

Manufacturer or software programmers of AI agents are liable for defects that cause damages to users, according to the report titled “The Rise of Artificial Intelligence: Future Outlook and Emerging Risks. However, AI decisions that are not directly related to design or manufacturing but are taken by an AI agent because of its interpretation of reality, would have no explicit liable party, according to current law.

“Leaving the decisions to courts may be expensive and inefficient if the number of AI-generated damages start increasing,” said Michael Bruch, head of emerging trends at Allianz Global Corporate & Specialty (AGCS).

“A solution to the lack of legal lability would be to establish expert agencies or authorities to develop a liability framework under which designers, manufacturers or sellers of AI products would be subject to limited tort liability.”

Insurers will have a crucial role to play in helping to minimize, manage and transfer emerging risks from AI applications. Traditional coverages will need to be adapted to protect consumers and businesses alike. Insurance will need to better address certain exposures to businesses such as cyber-attacks, business interruption, product recall and reputational damage. New liability insurance models will likely be adopted – in areas such as autonomous driving for example – increasing the pressure on manufacturers and software vendors and decreasing the strict liability of consumers, according to the report.

The insurance industry has been an early adopter of machine learning as it deals with lots of data and repetitive processes. “There is huge potential for AI to improve the insurance value chain,” Bruch explained. “Initially, it will help automate insurance processes to enable better delivery to our customers. Policies can be issued, and claims processed, faster and more efficiently,” Bruch added.

By boosting data analytics, AI will also give insurers and their customers a much better understanding of their risks so that they can be more effectively reduced, while new insurance solutions could also be developed. For example, AI-powered analytics could help companies better understand cyber risks and improve security. At the same time the technology could assist insurers in identifying accumulations of cyber exposure. Last but not least, AI will change the way insurers interact with their customers, enabling 24/7 service, according to Allianz.

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