Insuring emerging risks from AI

Abstract

This report examines the implications of recent progress in artificial intelligence (AI) for liability regimes and insurance markets within the United States. We argue that the insurance industry faces both a potential decline in traditional markets like auto insurance and emerging growth opportunities in AI agent and cybersecurity coverage. The report advocates for targeted reforms in liability laws, proposing a nuanced approach that may ease regulations for demonstrably-safer technologies, such as future autonomous vehicles, whilst strengthening oversight for AI agents and cyber risks. Key recommendations include implementing strict liability regimes for a subset of AI harms, mandating insurance coverage for certain AI applications, and expanding punitive damages to address catastrophic, uninsurable risks. These proposed changes would significantly impact the insurance sector, necessitating the development of new actuarial methodologies to quantify complex AI-related risks and to potentially underwrite a broader range of liabilities. We conclude that the insurance industry has a pivotal role to play in managing AI-related risks, fostering responsible innovation, and ensuring that the benefits of AI are broadly shared across society.