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Insurers launch cover for losses caused by AI chatbot errors

Policies will pay out for costs such as legal fees and court damages if AI tools underperform

Insurers at Lloyd’s of London have launched a product to cover companies for losses caused by malfunctioning artificial intelligence tools, as the sector aims to profit from concerns about the risk of costly hallucinations and errors by chatbots. The policies developed by Armilla, a start-up backed by Y Combinator, will cover the cost of court claims against a company if it is sued by a customer or another third party who has suffered harm because of an AI tool underperforming. Armilla said that the loss from selling the tickets at a lower price would have been covered by its insurance policy if Air Canada’s chatbot was found to have performed worse than expected.

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