Old Insurance Wisdom for New AI Risks
Artificial intelligence (AI) may be new to the insurance market, but uncertainty is an old customer. Insurers have spent centuries figuring out how to price unfamiliar risks, reward precautions, and avoid betting the whole portfolio on the same weak link. AI gives them new facts to assess, not a reason to discard that experience.
In a recent Truth on the Market post, Ian Adams revisited his decade-old warnings against coverage mandates and taxpayer backstops for cyber insurance. The cyber market’s subsequent growth supports his case for patience. Insurers have expanded coverage while refining prices, exclusions, and security requirements. As Adams argued, AI insurance deserves the same opportunity as courts clarify legal duties, reasonable precautions, and the link between misconduct and injury.
That adaptation has, in fact, already begun. For example, directors and officers (D&O) insurance, which covers certain claims against corporate leaders and companies, already addresses some AI-related risks. It also offers a window into how existing coverage can adapt, even though it covers only part of AI’s potential liabilities.
Together, these markets illustrate three classic bits of wisdom about the value of insurance: It can serve to preserve honest experimentation, reward effective precautions, and account for shared failures. Policymakers should give the market room to apply that wisdom before prescribing coverage or handing taxpayers the bill.