General Counsel Should Evaluate Dedicated AI Insurance as Incidents Surge
Companies face growing exposure to AI-related risks that traditional insurance policies don't cover, according to Gartner. General counsel should begin evaluating dedicated AI insurance products designed specifically for algorithmic failures and AI-related incidents.
AI-related incidents jumped 47% year-over-year by mid-July last year, according to the AI Incident Database, a tracking website run by the Responsible AI Collaborative. Separately, Gartner found that 29% of companies had experienced attacks on enterprise generative AI infrastructure.
Traditional business insurance increasingly excludes AI-related risks. Dedicated AI insurance can cover gaps including:
- Financial losses from AI hallucinations and errors
- Legal defense and settlements for algorithmic bias or discrimination
- Intellectual property and copyright infringement tied to model training
- Performance guarantees if AI models fail to meet accuracy or fairness benchmarks
Gartner predicts "death by AI" legal claims-lawsuits stemming from AI safety failures-will exceed 2,000 globally by the end of this year.
Alissa Lugo, senior director analyst in Gartner's legal and compliance practice, said: "As AI incidents surge and insurers increasingly add AI exclusions to traditional policies, companies face growing exposure to legal, financial and regulatory fallout from algorithmic failures."
Current risk management practices and standard business insurance leave organizations inadequately protected. Without dedicated coverage, companies could face substantial financial losses or brand damage from AI-related legal claims.
The gap between AI adoption and compliance readiness is widening. A March report from Thoropass found U.S. organizations are deploying AI faster than compliance frameworks can accommodate. Another March report from Womble Bond Dickinson showed companies are adopting AI without fully understanding the operational and legal consequences.
General counsel evaluating AI insurance should understand how dedicated policies address financial, operational, and legal implications specific to algorithmic failures. AI for Insurance and AI for Legal resources can help legal and compliance teams build this knowledge.
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