The rasce to automation

Businesses are in a race to integrate AI into their processes. The risks that arise from the race to automation and machine intelligence will no doubt impact insureds in nearly every industry and sector. AI is becoming more of a risk to D&O insurers even though its current form of disclosure related risks will likely resemble many of the other risks those insurers face in other industries. AI is rapidly changing the business landscape as its growth and reach appear potentially staggering.

Most companies are seemingly using AI in some capacity and those numbers are probably understated with each passing day. Businesses are using generative AI to gather, analyze, and synthesize large sets of data.

One of the biggest likely risks to insurers currently regarding AI is the unknown nature of potential liability. AI’s continued development and improvement and its ever-increasing uses make the extent and sources of liability unclear. With growing interest in this topic, and some risks coming to fruition, the future threats are seemingly becoming clearer for insurers. There is naturally some educated guess work.

For now, significant risk sits with AI developers, in addition to those developing AI systems and products. As such, we can expect more direct actions against AI developers and their directors and officers arising from how the AI products they have created are being used. These lawsuits are likely to take the form of intellectual property and privacy related lawsuits.

Potential risks

Potential risk is based on breaches of fiduciary duty and lack of oversight by D&Os. As regulatory and legislative interest in AI increases, the burden on D&O to understand new regulations and comply with them also increases. If and when companies and their D&Os do rely on AI for processes or decision making, there is a risk AI will get it wrong or produce inequitable, discriminatory, or even absurd results. This is all dependent on the underlying programming and human input.

Many of the risks posed to insurers and their insureds are unknown and based on educated guesses.

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