Generative AI, a rapidly advancing technology, is set to make a significant impact on various sectors, including insurance. According to Goldman Sachs, this AI revolution could lead to a $7 trillion boost in global GDP, with insurance companies benefiting from new products, services, and increased efficiency. To gain insight into the implications of generative AI for insurance, we turned to ChatGPT-4, a leading AI model, and sought its thoughts on the top three ways policyholders will be affected.
ChatGPT-4 highlighted the importance of policyholders assessing the risks associated with generative AI rather than focusing on direct use in policy underwriting and claims. Any company incorporating generative AI into its operations, or having employees use it, must take a step back and evaluate their existing insurance coverage to identify potential gaps in coverage.
Outlined below are some of the chief risks related to generative AI in commonly applicable lines of insurance:
1. Professional Liability/Errors & Omissions Insurance:
Using generative AI to produce work or answer questions is not without its risks. Current generative AI models have been known to generate inaccurate or fabricated information, falsely justifying their output with nonexistent sources. This was demonstrated when an attorney cited non-existent legal authorities provided by ChatGPT and faced consequences from the Court. Mistakes made by generative AI can have serious consequences, such as coding errors that expose vulnerabilities in a company’s network. Businesses actively using generative AI should review their existing professional liability (Errors & Omissions) insurance coverage to determine if it applies to generative AI-related claims. Additionally, policyholders should examine any new policies or policy renewals for exclusions or limitations concerning generative AI. Implementing an internal policy on employee use of generative AI is also advisable for both unauthorized use protection and to address questions raised by insurers in policy applications.
2. Commercial General Liability/Media Liability Insurance:
Generative AI raises concerns regarding intellectual property infringement and publicity rights. Lawsuits have already been filed against generative AI platforms for using copyrighted material without permission. Claims related to the use of allegedly infringing generative AI output might impact companies. Some existing insurance policies, such as CGL policies, may cover certain personal and advertising injury offenses, including copyright infringement and invasion of privacy. However, some claims relating to generative AI may fall outside the scope of these policies. Media Liability coverage, whether within cyber insurance or specialized Technology or Media Liability policies, may offer protection against claims of copyright infringement, plagiarism, trademark infringement, or invasion of privacy or publicity. Policyholders utilizing or considering the use of generative AI should assess their current insurance coverage, especially CGL and cyber policies, and determine the applicability of their coverage to intellectual property claims. Additional coverage may be necessary.
3. Employment Practices Liability Insurance (EPLI):
Generative AI’s potential for biased outcomes and offensive content has raised concerns. OpenAI, the company behind ChatGPT, acknowledges these concerns and is actively working to address them. However, policyholders should consider potential exposure to claims alleging disparate treatment of protected classes or claims related to hostile work environments if generative AI systems produce offensive content. Reviewing EPLI insurance coverage is advisable to address such potential claims.
Generative AI presents both opportunities and liability risks for policyholders. It is essential for companies to work with insurance brokers and experienced coverage counsel to ensure their insurance coverage is properly positioned to address possible claims arising from generative AI. As the insurance industry reacts to the developments in generative AI, companies must thoroughly evaluate their new and renewed insurance policies for any changes that may impact coverage of generative AI-related claims. By proactively addressing these considerations, policyholders can navigate the transformative landscape of generative AI while safeguarding their operations.
