New research shows the insurance industry might not be equipped to deal with AI risks.
Findings from the Artificial Intelligence Underwriting Company (AIUC), the subject of a Tuesday (July 14) Financial Times (FT) report, show that more than 90% of insurers’ exposure to artificial intelligence (AI) is in “silent” cover that is part of conventional policies.
That means risks are “largely unpriced” and in many cases unnoticed by insurers, said the report, co-authored with researchers from Anthropic and OpenAI.
The researchers also say rising litigation indicates a larger shift, with AI risks going from chatbots generating bogus information to AI agents taking action. This could leave businesses facing claims including professional negligence and wrongful death.
While some industry figures say these warnings are overblown, and part of a campaign to push new AI insurance products, AIUC Co-Founder Rajiv Dattani said legal liabilities had held back broader AI use at larger companies.
“Businesses cannot adopt AI unless they know the risk has been quantified and managed,” he said.
The FT cites some recent legal cases that highlight the issue. For example, Google is facing a suit seeking at least $110 million after its AI Overviews system allegedly defamed solar company Wolf River Electric, while a judge ordered Air Canada to honor a discount invented by its AI customer service chatbot.
The AIUC report argues these cases portend even bigger liabilities as AI systems grow more autonomous. It estimates that although an AI catastrophe could cause around $100 billion in direct damages, the larger economic fallout could be in the trillions of dollars if insurers pull coverage, businesses cool on AI adoption and investors shift away from the industry.
As covered here earlier this month, the insurance industry and regulators have begun pricing AI hallucination risks. For example, Lloyd’s of London last year introduced an insurance product specifically covering losses related to artificial intelligence hallucinations.
FINRA’s 2026 Annual Regulatory Oversight Report noted hallucinations as a specific compliance risk for broker-dealers, cautioning businesses to establish procedures for AI agents that may act beyond the user’s intended scope.
Cases like the Air Canada incident, that report added, are not about a failure of AI to understand the questions asked of it.
“It is a failure of the system to recognize that it does not know the answer, and to say so,” PYMNTS wrote. “When the invented answer concerns a company’s pricing, policy or refund terms, courts, regulators and insurers now agree: The company owns what its model said.”
The post Insurance Industry May Be Unprepared for Agentic AI Risks appeared first on PYMNTS.com.
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