AI risks make some insurers wary of corporate liability

RAND wants better data to price machine-made mishaps, apocalypse not included

If AI does end up killing us all, or just compounds our daily havoc, the insurance industry would rather not pay the bill.

"AI-related harms are already emerging, including incorrect or misleading outputs, deepfakes, privacy violations, intellectual property disputes, fraud, product defects, and discriminatory decisions," observes the RAND Corporation, a non-profit research think tank, in a newly issued report. "These harms create demand for insurance but do not fit neatly within existing insurance lines."

Companies want to protect themselves from the financial liability of deploying unreliable, mendacious, amoral AI agents, but insurance companies have become wary about taking on that risk. And if AI ends up being uninsurable, the AI industry will have to moderate its ambitions and sales targets while corporate customers delay AI projects to fulfill their fiduciary obligations.

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RAND says its report was motivated by the mismatch between rapid enterprise adoption of AI and the fragmented market for insuring or not insuring AI usage, particularly in the US. Apocalyptic scenarios aside, the report says that companies are already grappling with AI-related incidents and related litigation while insurers, regulators, brokers, and policyholders puzzle over risks, coverage, and rules.

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Insurer W. R. Berkley has already introduced exclusions in its D&O (directors and officers), E&O (errors and omissions), and Fiduciary Liability insurance products to exclude coverage for "any actual or alleged use, deployment, or development of Artificial Intelligence."

During the company's Q4 2025 earnings call, CEO W. Robert Berkley highlighted the need for underwriters to understand "the impact that [new technologies like AI are] having on our insureds, what it means for risk, and our ability to fully understand that risk so we can control it, select it, and price for it."

The RAND report observes that some insurance carriers are excluding AI-related harms, noting that in January 2026, Verisk/ISO – whose standardized forms appear in more than 80 percent of US property and casualty policies – introduced optional language carriers can adopt to exclude bodily injury, property damage, and other harms arising from generative AI.

Not all insurers are deciding not to cover AI harms. As RAND points out, coverage gaps are being filled by new and existing companies that believe they have a handle on the risk calculations.

To illustrate those risks, the report points to the Artificial Intelligence Incident Database (AIIDB) which lists tral-world harm or near-harm caused by generative AI. At the time of writing, the AIIDB lists 713 incidents drawn from more than 6,000 reports and covers AI use beyond chatbots.

Among these generative AI events, the categorical breakdown includes: misinformation and manipulation (586), deepfakes and synthetic media (346), deepfake enabled misinformation (333), hallucination and factual error (215), harmful content (92), agentic and autonomous failure (84), privacy and data leak (58), bias and discrimination (47), copyright and IP (20), other and unclassified (14), and wrongful AI attribution (7). The total of those events exceeds 713 because some incidents span multiple categories.

Then there are the 250 or so US lawsuits related to AI, largely related to copyright and IP, but also touching on privacy/surveillance, fraud and deception, negligence and product liability, discrimination and civil rights, and contracts/trade secrets.

And after that, the report touches on the dozens of laws in various US states covering AI intimate images, AI-generated child sexual abuse material (CSAM), automated decision making, AI in political ads, and related rules that could trip up businesses deploying AI.

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In light of all these potential problems, one might assume this AI thing is dead in the water. But no. Businesses keep deploying AI, despite potential uncertainty about whether corporate insurance policies protect them.

To address the gaps in the market, RAND argues that policy researchers and brokers, carriers, and reinsurers need to develop a common taxonomy to track AI incidents and claims. And the think tank wants to see state regulators push for an AI Coverage Notice so everyone is clear on what's covered and what isn't. 

RAND expects AI insurance coverage will move beyond being a specialty product. The report argues that the risks just need to be understood and priced accordingly. But that will take time. 

The AI industry may get the pause it has been asking for as insurers puzzle over how to price the end of humanity. ®