The AI Insurance Crisis: Uninsurable Risk? # The insurance industry faces an unprecedented challenge: how to price and cover risks from technology that even its creators cannot fully predict. As AI systems generate outputs that cause real-world harm, defamatory hallucinations, copyright infringement, discriminatory decisions, even deaths, insurers are confronting a fundamental question: can AI risks be insured at all?
The Insurance Industry’s AI Reckoning # The insurance industry faces an unprecedented challenge: how to underwrite risks from technology that even its creators don’t fully understand. As AI systems increasingly make decisions that traditionally required human judgment, and increasingly cause harm when those decisions go wrong, insurers are scrambling to adapt products designed for a pre-AI world.
Key Takeaways Most professionals don’t know if their malpractice insurance covers AI-related claims, and increasingly, it doesn’t Major carriers (AIG, Berkley, Hamilton) are actively rolling out AI exclusions Verisk’s 2026 standardized exclusions could reshape market-wide coverage overnight New AI-specific policies are emerging (like Armilla’s Lloyd’s-backed coverage), but adoption is limited Action required: Ask your carrier directly about AI coverage before renewal, don’t assume The Growing AI Coverage Gap # Professional liability insurance was designed for a world where humans made decisions and mistakes. As AI tools increasingly participate in professional services, from legal research to medical diagnosis to financial advice, a dangerous gap is emerging between the risks professionals face and the coverage they assume they have.