Preamble (TLDR)- Artificial Insurance
Probing the Coverage, Controls, and Measurement Gaps in Insurance for AI Risk
⏹️ We’re as free to develop AI without risks as much as we’re free to draw square circles. Risk is not an obstacle to AI, it’s a condition. [nod to watts]
🧰 But while risk is one of the through-lines of AI development, AI capabilities enjoy evolutionary tailwinds while our structures for addressing that ‘condition’ are ripe for innovation.
🦐 To be sure there are notable AI risk activities in researchland, by non-profit and philanthropic efforts, and from standards and regulatory bodies. But temporally and spatially these collective efforts are Little Davids in the realm of the AI Goliaths.
🎬 Regulatory time horizons, let alone enforcement efficacy and political underpinnings, argue against putting our eggs in this basket. The move-fast market simply doesn’t incentivize appropriate AI risk management and there’s no signs that AI risk won’t conscript us as extras in “Cyber Security, The Sequel”.
🪬 Insurance is another market structure, however, that has been almost deafeningly silent when it comes to addressing AI risk. Some will say it’s because AI incident costs have yet to hit a critical threshold of internalization. Others might argue that liability is too nascent, there’s too little historical data to establish baseline risk for underwriting, and/or information asymmetry and causal complexity (among other factors) impede insurability.
⁉️ The open question is whether insurance will merely pressure relieve companies’ risk internalization, might it actually drive it, or whether we need to build alternative mechanisms to address the inevitable AI risk?
🫣 Back to the Land of the Obvious, let’s start with understanding the current. Here’s the results of my rock-lifting experiment … an invitation to put your arm around the question. Either way, it’s fair to say that a non-deliberate, wait-and-see posture is exposing insurers to unpriced AI risks and orgs to protection gaps.
Full Monty
Artificial Insurance - Series Intro
Part 2. Insurance Policy Coverage Gaps
Part 3. Coverage Insights Under Cyber and Tech E&O