GCs Advised to Consider AI Insurance to Cover Against Rise in AI-Related Risks

Why It Matters

AI failures can trigger costly lawsuits, regulatory penalties, and brand damage, making targeted insurance essential for corporate risk management.

Key Takeaways

• AI incident reports jumped 47% YoY, highlighting escalating exposure
• 29% of firms faced attacks on enterprise generative‑AI systems
• Traditional insurers increasingly add AI exclusions, creating coverage gaps
• Dedicated AI policies cover hallucinations, bias, IP infringement, performance guarantees
• Gartner forecasts over 2,000 global AI‑related death‑by‑AI claims this year

Pulse Analysis

The rapid adoption of generative‑AI tools has outpaced the legal safeguards many companies rely on. Data from the AI Incident Database shows a 47% increase in reported harms, while a Gartner survey found nearly one‑third of enterprises experienced attacks on their AI infrastructure. These trends reflect a broader vulnerability: AI models can produce erroneous outputs, embed bias, or infringe on intellectual property, exposing firms to litigation and regulatory scrutiny that traditional insurance policies often overlook.

Recognizing this gap, insurers are rolling out "affirmative AI insurance" products designed to fill the void left by conventional coverage. Such policies typically address financial losses from hallucinations, legal defense costs for bias or discrimination claims, and liabilities tied to IP infringement during model training. Some offerings even guarantee performance metrics, ensuring models meet agreed‑upon accuracy or fairness standards. Gartner’s projection of more than 2,000 death‑by‑AI lawsuits worldwide by year‑end signals a looming wave of high‑stakes claims that could strain corporate balance sheets and reputations.

For general counsel, the imperative is clear: integrate AI insurance into broader risk‑management frameworks. This means conducting thorough assessments of AI deployments, mapping exposures that fall outside existing policies, and negotiating tailored coverage with insurers. As regulators tighten oversight and compliance teams scramble to keep pace, proactive insurance can serve as a financial backstop while companies continue to innovate. The emerging market for AI‑specific coverage also presents growth opportunities for insurers willing to develop expertise in algorithmic risk, positioning them as strategic partners in the responsible scaling of AI across industries.