'Silent' on AI: The Hidden Advantage of your Tech E&O Policy
Tyler Chalk
Vice President of Technology | Property Broker, Casualty Broker, Accident & Health
When discussing insurance requirements with startup CEOs, Co-Founders, CFOs, CTOs, and others, I often get into contractual compliance, renewal premium management, and risk mitigation. However, there is a growing concern that their coverage may not adequately respond to AI-related losses, potentially leaving them exposed to significant financial and reputational risks.?
For those unfamiliar with Tech E&O, this insurance policy is the primary protector for companies that provide professional services through software - it's also the coverage that picks up AI-related losses. The coverage is unique in that it bundles E&O (Errors and Omissions—also known as Professional Liability, which covers claims of negligence or failure to perform professional duties) with Cyber Liability (which covers losses from data breaches, hacking, and other cyber attacks). Why are they bundled? Not only do software engineers/developers sometimes make mistakes, leading to the product not performing as intended, but any number of Cyber Events/Attacks (e.g., DDos, Wiper, Ransomware, etc.) can also cause the product not to perform as intended, which results in similar losses.
So, back to AI and how it relates to Tech E&O Insurance: What happens if the language model your company integrates with goes off the rails, causing significant financial losses or reputational damage? Are you better off with coverage that names AI in the policy form, with specific definitions and sub-limits? Or, is it better that the policy be 'silent' on AI, which means the coverage does not explicitly address or define AI in any way?
Here's why it's advantageous for the coverage to be 'silent' regarding AI insurance.?
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So what's the takeaway? Most Tech E&O policies have AI exposures baked into the existing coverage via their definitions of 'Technology Professional Services/Products.' They don't exclude AI or even mention this technology, which, for now, is probably our best bet. Sure, some interesting AI endorsements have been added to Tech E&O policies that include 'Algorithmic Bias and Discrimination' and 'AI Regulatory Violations.' But these features are subject to lower limits of coverage and cost extra, and it's not entirely apparent these exposures won't get picked up on an AI 'silent' Tech E&O policy form.
In the following months and years, prepare to see many more AI enhancements, exclusions, and policy limitations. Your insurance broker's role, especially concerning AI coverage advice, will become more valuable in these rapidly developing times.?
So please book a call with your insurance broker, and be sure to discuss how your technology interfaces with AI. Weigh the pros and cons of comprehensive (expensive) coverage vs. more affordable options, share the options with your board of directors (if applicable), and get the coverage that makes sense for your company.
Chief Executive Officer and Co-founder at 044.ai Lab
5 个月Tyler, how are you?
Procurement Manager and Marketing Specialist | MBA Candidate
7 个月Tyler, thanks for sharing!
Exited founder turned CEO-coach | Helping early/mid-stage startup founders scale into executive leaders & build low-drama companies
9 个月AI is changing rapidly; coverage policies need flexibility.
CEO @ SOUNDBOARD.AI (Soundboard Entertainment produces cinematic virtual reality films for virtual concerts in cinemas worldwide. The entertainment concept is similar to a Pink Floyd laser show in a planetarium.)
9 个月??