Caution Alert: AI Exclusions Quietly Expanding in Insurance Policies—But Cyber Coverage Holds Steady for Now
AI exclusions insurance policies, silent AI coverage ending, generative AI risks liability, cyber insurance AI threats, and insurance industry AI trends are surging in discussions as carriers grapple with the unpredictable nature of artificial intelligence, prompting widespread policy changes across commercial lines.
A subtle shift is underway in the insurance world. Insurers are increasingly introducing exclusions for risks related to artificial intelligence (AI), moving away from “silent” coverage where AI incidents were implicitly included under traditional policies. This trend, accelerating throughout 2025, reflects growing concerns over AI’s opacity, potential for massive correlated losses, and evolving liabilities like hallucinations, deepfakes, and algorithmic biases.
While AI was once covered without explicit mention in lines like property, liability, and professional indemnity—similar to early “silent cyber” risks—carriers are now clarifying or limiting exposure. Major players including AIG, WR Berkley, and Great American have sought regulatory approvals for generative AI exclusions in corporate policies, aiming to avoid payouts for claims tied to AI use, such as inaccurate outputs or intellectual property infringements. These exclusions can be broad, potentially applying to any claim involving AI, even peripherally.
Expert Alexandra Bretschneider, vice president and cyber practice leader at Johnson Kendall Johnson, noted that while exclusions are proliferating in management liability, directors and officers (D&O), errors and omissions (E&O), and other lines, cyber policies are bucking the trend. “From a cyber insurance standpoint, some carriers are adding endorsements to clarify they intend to cover losses initiated by an AI threat actor,” she explained. This includes sophisticated attacks like deepfakes and AI-driven social engineering, where cyber insurers are reinforcing rather than retreating from coverage.
Industry analysts compare this to the evolution of cyber insurance two decades ago: initial silent coverage led to exclusions and dedicated products as risks materialized. WTW insights highlight that AI is prompting a similar pivot, with insurers introducing specific endorsements or standalone offerings. Some, like partnerships involving Google Cloud with Beazley, Chubb, and Munich Re, provide affirmative AI coverage. However, broad exclusions in non-cyber lines raise alarms, as AI integrates into nearly every business process—from decision-making tools to customer service chatbots.
Public and expert reactions underscore the uncertainty. Brokers report pushback against sweeping exclusions, fearing they could deny legitimate claims. One risk manager warned that “black box” AI decisions make underwriting challenging, potentially leading to higher premiums or denied coverage. Legal experts advise policyholders to scrutinize renewals, negotiate removals, or seek specialized products, as gaps could leave companies exposed to multimillion-dollar liabilities.
For U.S. businesses and consumers, this matters profoundly. AI drives innovation in sectors like healthcare, finance, and tech—boosting efficiency and economic growth—but unchecked risks could stifle adoption if insurance safety nets shrink. Small firms may face higher costs or reduced coverage, impacting competitiveness. On a broader level, it fuels debates on AI regulation, accountability, and whether insurers’ caution signals deeper systemic vulnerabilities in the technology.
Looking ahead, as claims data accumulates and litigation rises—think defamation from AI hallucinations or privacy breaches—expect more tailored AI products. Cyber remains a bright spot, often covering AI-enabled threats without major exclusions yet. But the overall trend suggests the era of implicit AI protection is ending, urging proactive risk management.
The insurance landscape is adapting rapidly to AI’s rise. With AI exclusions insurance policies, silent AI coverage ending, generative AI risks liability, cyber insurance AI threats, and insurance industry AI trends gaining traction, businesses must stay vigilant to avoid unexpected gaps.
In summary, while AI exclusions spread across many lines amid uncertainty, cyber policies continue affirming coverage for AI-related threats—for now—highlighting a bifurcated market responding to this transformative technology.
By Sam Michael
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