Insurance to drive AI reforms with the risk of increased litigation

Risks to watch include discrimination bias and privacy concerns

The explosion of AI, particularly generative AI, has intensified the need for regulation globally. Calls for action from federal and local governments as well as human rights organizations will continue as countries around the world are in the nascent stage of regulation, grappling first and foremost with how to clearly define AI itself and the risks it presents. 

Chief among the risks are discrimination bias and privacy concerns. With the increased reliance on generative AI, we expect to see discrimination, bias, and privacy concerns amplified as key risks and probable litigation targets. Companies relying on the use of generative AI open themselves up to liability over bias and privacy issues, as do the developers of the AI systems which will result in an intensifying push for safeguards as the lines become increasingly blurred in determining whether humans or machines are at fault. It seems only a matter of time before an AI system is sued, along with the companies relying on it. Regardless, we expect the number of AI-related cases, particularly class action suits, to increase.    

As companies race to develop or adopt AI technology, insurance will be a critical component of moving projects forward as well as protecting against risks. The big question is will insurers want to address the risks and if so, how. As insurers also increasingly adopt AI tools within their organisations to streamline and improve operations, they will need to carefully consider what they are willing to cover when it comes to AI. Will we see policies written to protect AI systems? Likewise, as AI related litigation increases, and insurance becomes harder to obtain, we expect companies to more carefully consider contracts entered into with third parties over AI and adopt strict policies around the use of OpenAI platforms. One thing seems certain: following a sharp uptick in AI-related litigation, insurance will be a catalyst for regulation and industry reforms.