Half of firms flag AI errors as insurers struggle to keep pace
Companies are adopting artificial intelligence faster than insurers can develop coverage for the risks it creates, according to a Gallagher Re report. The gap leaves businesses exposed to legal and financial liability that traditional policies don't cover.
The report identifies a fundamental problem: responsibility for AI failures typically lands on the companies using the tools, not the developers who built them. When AI systems produce false outputs, make biased decisions, or fail outright, the deploying organization bears the legal risk.
Fifty-seven percent of 1,250 surveyed companies identified AI errors and misinformation as a key risk. More than half cited legal, reputational, and data privacy concerns as major worries.
Existing coverage falls short
Traditional insurance policies-cyber, professional liability, and product liability-don't account for losses caused by AI outputs themselves. A cyber policy may cover attacks on AI systems, but not claims arising from defamation, copyright disputes, or discriminatory decisions made by the AI.
Contaminated training data, model failures, and biased algorithms can trigger legal claims without involving a cyberattack or human error. These gaps create exposure that current policies leave unaddressed.
Insurers have begun rolling out specialized AI coverage, but the report warns the offerings remain limited compared to the scope of emerging risks.
Legal cases mounting
Litigation tied to generative AI is accelerating. As more companies deploy AI across operations, the number of legal disputes over AI-related harms is climbing, putting pressure on both insurers and policyholders to understand where liability actually sits.
The mismatch between AI adoption rates and insurance product development creates a window where businesses operate with incomplete protection. Until coverage catches up to deployment, companies face uninsured losses from a technology they're already relying on.
For insurance professionals, this signals both a coverage challenge and a market opportunity-one that requires moving faster than the typical product development cycle.
Learn more about AI for Insurance and AI for Legal to understand how these risks intersect with your business.
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