Artificial Intelligence (AI) has received an increasing amount of attention in multiple areas. The uncertainties and risks in AI-powered systems have created reluctance in their wild adoption. As an economic solution to compensate for potential damages, AI liability insurance is a promising market to enhance the integration of AI into daily life. In this work, we use an AI-powered E-diagnosis system as an example to study AI liability insurance. We provide a quantitative risk assessment model with evidence-based numerical analysis. We discuss the insurability criteria for AI technologies and suggest necessary adjustments to accommodate the features of AI products. We show that AI liability insurance can act as a regulatory mechanism to incentivize compliant behaviors and serve as a certificate of high-quality AI systems. Furthermore, we suggest premium adjustment to reflect the dynamic evolution of the inherent uncertainty in AI. Moral hazard problems are discussed and suggestions for AI liability insurance are provided.

We've probably all had to contact an insurer about a problem only to find it's not covered in the small print. Rates are usually fixed, and sometimes unfair. There may also be hurdles in approving payment once a claim is made. Such factors can explain why a 2019 YouGov report found almost 70% of policy holders believed providers will do whatever they can to avoid paying out in the case of a legitimate claim. A 2018 TrustPilot report meanwhile found that insurance providers were the least trusted companies in the least trusted field, which was, perhaps unsurprisingly, financial services.

The pandemic has accelerated the adoption of technology for many companies. Governments are developing strategies to encourage further adoption. However, many businesses are still wary of AI and require additional reassurance to go ahead, particularly in industries where implementation is slow. AI insurance is the solution to speed up adoption, says Saar Yoskovitz, co-founder & CEO of Augury. As the capabilities of AI solutions improve and development and implementation become easier, businesses are shifting their views and increasing the use of the technology.

AI is not only a powerful tool, but it is also can be a highly risky technology if used incorrectly. No matter how much you take care of, there might be some lurking risk, which is either unknown or uncontrollable, and that means you need a different way of risk-management. If you perform a thorough pre-mortem analysis, ensure that training and testing are complete, and stress test all the systems with red teams' help, you can be almost confident about the system's performance. However, there might be some unidentified or identified risk but can't be anticipated or controlled. Such residual risk can be dealt with by way of transference. Transference of risk transfer is a risk management and control strategy that involves the contractual shifting of a pure risk from one party to another. One example is the purchase of an insurance policy, by which a policyholder passes the specified risk of loss to the insurer.

Most major companies, including Google, Amazon, Microsoft, Uber, and Tesla, have had their artificial intelligence (AI) and machine learning (ML) systems tricked, evaded, or unintentially misled. Yet despite these high profile failures, most organizations' leaders are largely unaware of their own risk when creating and using AI and ML technologies. This is not entirely the fault of the businesses. An emerging solution is AI/ML-specific insurance. But who will need it and exactly what it will cover are still open questions.

Quantemplate, a startup providing self-service, cloud-based automated data solutions for insurers and reinsurers, today revealed that it raised over $12 million in a recent funding round led by Route 66 Ventures and Transamerica Ventures, with participation from Anthemis Group, Allianz X, and Insight Catastrophe Group. The raise brings the New York- and London-based company's total raised to over $25 million, which CEO David Lundgren said will fuel R&D and customer acquisition as Quantemplate grows its global sales and marketing teams. Coinciding with the capital infusion, Quantemplate also announced the general availability of its platform. "With this recently secured round of funding, Quantemplate is primed and ready to present our proven technology to the [insurance and reinsurance] industry. We are eager to provide the unique tools and insights customers need to make business processes more efficient, while at the same time appreciating a more comprehensive assessment of risk," said Lundgren.