A burgeoning ‘AI-generated’ market: Insurance safeguards against AI risk
AI insurance could be a nearly US$5 billion market in just eight years, according to Deloitte US
Over the next few years, society may be hard-pressed to find any aspect of daily life that doesn’t have an artificial intelligence engine in the background. But an AI-powered world introduces both anticipated and unforeseen risks.
Consider the following scenario: In the not too distant future, a person could take their self-driving car to a doctor’s appointment to get an AI-assisted diagnosis, followed by AI-assisted surgery and, eventually, filing an insurance claim through an AI chatbot. Many things can go wrong in this scenario: The autonomous car could bump into another vehicle, the initial diagnosis could be incorrect, or the chatbot could reject the valid claim outright. The risks stemming from AI in this example could range from a significant financial loss to a potential fatality.
While some of these risks might seem futuristic, they’re already starting to materialize. In fact, Stanford University’s AI Index noted there were 260 AI incidents and controversies in 2023, a 2,500% increase from just 10 in 2012.1 And in a recent World Economic Forum report, nearly 1,500 surveyed professionals identified AI as their organization’s biggest technology risk.2
Enter the AI insurance policy. By drawing parallels between the post-financial–crisis growth of cyber insurance with AI insurance, the Deloitte Center for Financial Services projects that by 2032, insurers potentially could write approximately US$4.7 billion in annual global AI insurance premiums, at a compound annual growth rate of around 80%.3
A few large reinsurers are already participating in the AI insurance market. Munich Re rolled out a specific AI insurance product, primarily meant for AI startups, in 2018.4 They also launched coverages for AI developers, adopters, and businesses building self-developed AI models. Several insurtech startups are also beginning to operate in this space. Armilla AI launched a product that guarantees the performance of AI products.5
Just from generative AI alone, businesses could face losses from risks such as cybersecurity threats, copyright infringements, wrong or biased outputs, misinformation or disinformation, and data privacy issues. Having an insurance policy to protect against such issues could help assuage concerns and even encourage further AI adoption at scale.
Research and analysis by the Deloitte Center for Financial Services
Read the full report at www.deloitte.com/insights/fsi-predictions.