Insurers race to cover AI errors

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Megan McCarty Carrino (0:49)

AI makes mistakes. Does your insurance cover them? From American Public Media, this is Marketplace Tech. I'm Megan McCarty Carrino.

More than one in five US companies are using AI in daily operations now, according to Goldman Sachs. And that's creating new liabilities for businesses. That's where insurance comes in. Deloitte projects insurance for AI will grow into a nearly $5 billion global business by 2032

One early mover is Corgi, a startup insurance company that also operates a buzzy cafe in San Francisco's financial district. You unfortunately won't find any Corgis at Corgi Cafe. That violates the health code, apparently. But you will find plenty of startup founders, like Eamon Halu, who's been working from the cafe with his laptop and a couple buddies.

Eamon Halu (1:55)

We have like five to six businesses, all very successful.

Megan McCarty Carrino (2:00)

He won't go into much detail about what they all do exactly. Someone might steal his ideas. But there's a ski app, sports betting analysis, Reddit marketing, all powered by AI.

Eamon Halu (2:15)

So it's like you do a lot of work in the beginning, and then you can kind of step away while it's making revenue.

Megan McCarty Carrino (2:22)

Corgi has built its business to serve this new generation of AI native entrepreneurs, says CEO Nico Lacqua, partially with protein shakes and espresso shots.

Nico Lacqua (2:33)

We don't have decaf for a reason. I think people do need to lock in a little bit.

Megan McCarty Carrino (2:37)

But the real business and the namesake Corgi are in the office upstairs. The cafe space just came with the lease and turned into a fun side project.

Nico Lacqua (2:48)

We're best known for our insurance and our technology companies.

Megan McCarty Carrino (2:52)

That includes all the usual policies and a new product for AI liability.

Nico Lacqua (2:58)

Just like a human might mess up, AI might mess up even worse or it might say things that it shouldn't say. It might calculate things it shouldn't calculate. It might even cause outages or things like that.

Megan McCarty Carrino (3:08)

Corgi's policy explicitly covers damages that could result from these AI mistakes. It's something the wider industry has only started to grapple with, says John Farley, who leads cyber practice at the insurance brokerage Gallagher.

John Farley (3:24)

The insurance market is beginning to move from silence on AI to scrutiny of AI.

Megan McCarty Carrino (3:31)

He says most traditional policies simply don't mention AI.

But the insurance industry has begun standardizing language and seeking regulatory approvals to potentially exclude AI from their plans. The challenge, he says, is figuring out how big of a risk AI poses for businesses.

John Farley (3:51)

Historically, the insurance markets have used modeling tools rather than measure the likelihood of, say, a hurricane in Florida. We've got lots of data there. Here, not so much.

Megan McCarty Carrino (4:02)

We'll be right back.

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Megan McCarty Carrino (5:05)

You're listening to Marketplace Tech. I'm Megan McCarty-Corino. We're back with more on AI insurance.

How do you know if a brand new agentic AI system your company uses to process invoices is likely to make a costly mistake? That's what Ines Butemacha is trying to quantify with her AI insurance startup, Claimy.