Armilla’s Ramakrishnan: Industry in investigative phase on AI exposures

By George Abbott

Aug 19 - (The Insurer) - The rapid adoption of artificial intelligence is forcing insurers and their clients to assess whether current policies cover the risks, but the market is still in the “investigative phase” of determining how to handle the exposure, according to Armilla’s Karthik Ramakrishnan.

"We are all in an investigative phase as an industry in terms of how we deal with this risk … it’s the same lessons from silent cyber," Ramakrishnan said in an interview with The Insurer TV.

Ramakrishnan, CEO and founder of AI-focused insurtech Armilla, explained: “With the pace at which AI is getting adopted … there is a significant level of conversation right now in whether their existing policies adequately cover it.”

For now, most AI exposures covered silently, meaning the risk is not explicitly addressed in the policy. Ramakrishnan said this raises a basic choice for insureds: “Do I litigate it, should that claim get denied? Or should I just affirmatively buy a cover and sleep well at night today?”

As a result, he said affirmative AI endorsements are drawing interest from clients looking for certainty. “It’s no longer enough to say I have silent cover … a lot of them are making the choice to have an affirmative cover.”

INDUSTRIES' REACTIVE APPROACH

Asked whether large carriers are tracking AI-related claims, Ramakrishnan was blunt: “Up until now … no.”

While some insurers have started to examine whether claims under cyber, errors and omissions, general liability or D&O policies originated from an AI system, he said it will take time to build robust datasets.

Ramakrishnan does not expect the industry to get a proper grip on the issue until claims start to mount.

“Once there are a few big claims, or the volume of claims increases, the industry has to pay attention to that and see how they want to deal with it,” he said. “We’re going to have to see the reactive first before we see the large-scale adoption of the proactive approach.”

This week, The Insurer is publishing a series of articles about emerging AI risks. Read Monday's take on the growing frequency and severity of AI incidents, and look out for articles on coverage disputes, market cycles and product innovation later this week.