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Insurers launch cover for losses caused by AI chatbot errors

ft.com

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Re: Insurers launch cover for losses caused by AI chatbot errors

#31

Post by notahacker »

loeber wrote: post #19
omoikane wrote: post #17

Earlier quoted context omitted.

Was it also commonplace to have insurances covering human errors? For example: > A tribunal last year ordered Air Canada to honour a discount that its customer service chatbot had made up. If a human sales representative had made that mistake instead of a chatbot, I wonder if companies will try to recover that cost through insurance. Or perhaps AI insurance won't cover the chatbot for that either?

Yes, this is called Professional Liability or Errors & Omissions insurance. It's an important insurance category, but limited in market size. It's uncommon to have e.g. human sales representatives covered for this, but your doctor, lawyer, accountant, architect, etc. will all carry this kind of insurance.

The key bit is why those niches have it: typically either regulators require it or clients require it (sometimes specifying it to a given value in their contract). And that's because the consequences of mistakes some professions make can be very expensive relative to the size of their business. Also helps that a lot of the errors they cover are very rare so pooling the risk as insurance makes more sense...

cf an airline chatbot agreeing to an inappropriate refund or giving wrong advice that leaves the airline deciding to apologise and pay their holiday-related expenses. Those are costs it makes more sense for the airline to eat than get their insurers to price up (unlike other aviation insurance which can be for eye-wateringly large sums) even if it happens several times a month (which if your chatbot is an LLM supposed to handle a wide variety of questions it probably does). Same goes for the human sales representatives who may work with higher-stakes relationships than chatbots but the consequence of their error is usually not much bigger than issue refund or lose client relationship

I guess chatbots/LLMs will end up as a special case for professional indemnity insurance in a lot of those regulated firms as lawyers/accountants start to use them in certain contexts.

Re: Insurers launch cover for losses caused by AI chatbot errors

#32

Post by [deleted] »

loeber wrote: post #19
omoikane wrote: post #17

Earlier quoted context omitted.

Was it also commonplace to have insurances covering human errors? For example: > A tribunal last year ordered Air Canada to honour a discount that its customer service chatbot had made up. If a human sales representative had made that mistake instead of a chatbot, I wonder if companies will try to recover that cost through insurance. Or perhaps AI insurance won't cover the chatbot for that either?

Yes, this is called Professional Liability or Errors & Omissions insurance. It's an important insurance category, but limited in market size. It's uncommon to have e.g. human sales representatives covered for this, but your doctor, lawyer, accountant, architect, etc. will all carry this kind of insurance.

[deleted]

Re: Insurers launch cover for losses caused by AI chatbot errors

#34

Post by bpodgursky »

em-bee wrote: post #25
loeber wrote: post #14

Insurance tech guy here. This is not the revolutionary new type of insurance that it might look like at first glance. It's an adaptation of already-commonplace insurance products that are limited in their market size. If you're curious about this topic, I've written about it at length: https://loeber.substack.com/p/24-insurance-for-ai-easier-sai...

while i am not a fan of the AI craze, and regardless of what i think of the practices of certain insurers, my first thought was that the current state of AI naturally lends itself for insurance. there is a chance that AI gives you a right or wrong answer. and a lesser chance that a wrong answer will lead to damages. but risk averse users will want to protect themselves. so as long as the income insurers make is highe…

It's also easier in many ways than insuring against employees because the insurance company can evaluate a precise model and insure against it, as opposed to employees where the hiring bar can vary.

Re: Insurers launch cover for losses caused by AI chatbot errors

#35

Post by Retric »

bpodgursky wrote: post #34
em-bee wrote: post #25

Earlier quoted context omitted.

while i am not a fan of the AI craze, and regardless of what i think of the practices of certain insurers, my first thought was that the current state of AI naturally lends itself for insurance. there is a chance that AI gives you a right or wrong answer. and a lesser chance that a wrong answer will lead to damages. but risk averse users will want to protect themselves. so as long as the income insurers make is highe…

It's also easier in many ways than insuring against employees because the insurance company can evaluate a precise model and insure against it, as opposed to employees where the hiring bar can vary.

Doing that kind of analysis is expensive for the insurance company.

Insurance generally offsets low precision with higher premiums and a wide range of clients. 1 employee has a lot of variability but 100,000 become reasonably predictable.

Re: Insurers launch cover for losses caused by AI chatbot errors

#36

Post by willyt »

notahacker wrote: post #31
loeber wrote: post #19

Earlier quoted context omitted.

Yes, this is called Professional Liability or Errors & Omissions insurance. It's an important insurance category, but limited in market size. It's uncommon to have e.g. human sales representatives covered for this, but your doctor, lawyer, accountant, architect, etc. will all carry this kind of insurance.

The key bit is why those niches have it: typically either regulators require it or clients require it (sometimes specifying it to a given value in their contract). And that's because the consequences of mistakes some professions make can be very expensive relative to the size of their business. Also helps that a lot of the errors they cover are very rare so pooling the risk as insurance makes more sense... cf an airl…

Yes. I would say it probably makes more sense that whoever designed the chatbot system for the airline will need indemnity insurance. Then the airline has somewhere to go if it starts giving out free plane tickets willy nilly.

Re: Insurers launch cover for losses caused by AI chatbot errors

#38

Post by SoftTalker »

kjs3 wrote: post #29
loeber wrote: post #19

Earlier quoted context omitted.

Yes, this is called Professional Liability or Errors & Omissions insurance. It's an important insurance category, but limited in market size. It's uncommon to have e.g. human sales representatives covered for this, but your doctor, lawyer, accountant, architect, etc. will all carry this kind of insurance.

I carried E&O for years as an independent consultant. I fortunately never had to use it, but I have peers whose financial future was probably saved by having it.

How is it priced? I was always under the impression that it was prohibitively expensive for one-person operations.

Re: Insurers launch cover for losses caused by AI chatbot errors

#39

Post by rchaud »

imoverclocked wrote: post #24

At best, this screams, “you’re doing it wrong.” We know this stuff isn’t ready, is easily hacked, is undesirable by consumers… and will fail. Somehow, it’s still more efficient to cover losses and degrade service than to approach the problem differently.

That assumes that insurers will readily pay out when such claims are made. Insurers don't make money doing that.
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