As technology has evolved, artificial intelligence (AI) has become an asset used in countless ways – whether it’s walking into a room and asking a virtual assistant to turn on the lights or steering a car by itself.
However, AI can pose an additional risk to businesses and, from an insurance perspective, it raises liability issues. Therefore, it is essential for companies to ensure that they have the right protection. Sophistication is paramount, and there are many unknowns when it comes to determining liability and insurance coverage.
How is artificial intelligence used?
Different industries use artificial intelligence in different ways. For example, many shipping companies are using AI GPS tools to create more efficient routes for drivers and algorithms to provide more accurate estimates of when a package will be delivered after leaving its destination. Some life science companies are also using AI to speed up study and literature review completion time, and some automakers are using AI to advance self-driving projects.
How is artificial intelligence used in insurance?
As business and industry have evolved with AI, insurers have begun to use artificial intelligence to provide more accurate pricing. This is especially important for medium and large companies, because as companies grow, their exposure to risk also increases significantly. Additionally, when dealing with medium and large commercial businesses, there may be distinct or unique risks that can make it difficult to streamline the underwriting process.
For example, it’s not uncommon for medium and large businesses to have dozens or even hundreds of locations. It is unrealistic to send someone to each location to assess risk exposures to determine the cost of insurance. This is when aerial imagery becomes useful. One way The Hartford uses artificial intelligence to assess risk in medium and large companies. The insurer integrates AI with aerial photos to identify the condition of a roof and make recommendations to the company if repairs need to be made.
The risks of artificial intelligence
Although artificial intelligence has benefits, it can create new risks for businesses. One of the biggest risks relates to the right to privacy. Some AI use cases may operate without express consumer consent, and others may identify personal traits or interests that impact the consumer. These privacy considerations affect how AI technology is deployed and have led to intense scrutiny from regulators, legislators and end users.
Artificial intelligence and civil liability
Depending on how a company uses artificial intelligence with its products or services, liability can be difficult to identify. Some automakers are using artificial intelligence to advance driver assistance technology. With AI, some cars can steer and drive on their own in lane lines, read speed limit signs, know when to apply emergency braking to try to reduce collision damage, and alert drivers who do not pay attention. However, the question may arise as to who is responsible if someone used one of these features and had an accident.
Since traditional product liability is based on tort liability. When it comes to AI, liability can arise from the design of a product. For example, was there a mistake in the way the software was supposed to work? Due to this uncertainty, purchasing insurance coverage can become complicated.
Insurers look at what types of product liability risks are present without any smart functionality, and this information is then compared to any risks that may be present after adding artificial intelligence. Then insurers look at the increased risk after adding AI. As AI adds more capabilities and risk scenarios change dramatically, insurers need to assess a wider range of risks.
Insurance Considerations for Artificial Intelligence
Due to the uncertainty of a company’s increased risk due to the use of artificial intelligence, companies should review their existing insurance coverage to ensure they have protection sufficient. Some policies that businesses should review or consider purchasing include liability insurance, commercial auto insurance, and worldwide insurance.
The use of artificial intelligence can also affect a company’s business revenue valuation and chosen coverage limit. AI-augmented revenue streams can be interrupted by loss of data or connectivity. Understanding how income is affected by an interruption and the potential for such an interruption is key to determining an appropriate business income limit. Since every business is unique and the use of AI varies, businesses should work with an agent or broker to ensure they have the right coverage.
The future of artificial intelligence
Decades ago, the idea of a virtual assistant reading and responding to messages or a computer analyzing an image to determine the condition of a roof seemed unlikely. Over time, artificial intelligence has become more sophisticated and valuable to different businesses. Today, automakers are working on self-driving vehicles, and hospitals and healthcare systems are potentially using artificial intelligence to help with diagnosis and advanced treatment plans. Insurers are also combining artificial intelligence with connected devices, or the Internet of Things (IoT), to reduce losses. This includes using water sensors to shut off the water supply or send an alert if it detects a leak, which can save thousands of dollars by preventing losses. That said, AI will continue to evolve and can be a valuable feature for businesses – and, ultimately, customers and customers.
Jim Charon ([email protected]) is the director of underwriting for the Hartford technology industry practice. Brad John ([email protected]) is Hartford’s life sciences industry practice leader. And Matt King ([email protected]) is the Vice President of Data Science for Hartford’s Medium and Large Business Segment.
The article is published with permission from The Hartford and may not be reproduced.
The information provided in these documents is intended to be general and advisory in nature. It should not be considered legal advice. The Hartford does not warrant that implementation of any opinion or recommendation contained herein: (i) will result in the elimination of any unsafe conditions at your business premises or with respect to your business operations; or (ii) be an appropriate legal or business practice. The Hartford assumes no responsibility for risk control or remediation or legal compliance with respect to your business practices, and the opinions and recommendations contained herein do not constitute our commitment, on your behalf or for the benefit of others, to determine or warrant that your business premises, locations or operations are safe or sanitary, or comply with any law, rule or regulation. Readers seeking to resolve specific security, legal, or business issues or concerns related to the information provided in these materials should consult their security consultant, attorney, or business advisors. All information and representations herein are as of February 2022.