AI Insurance: An Overhyped Market?

With the widespread adoption of AI, AI risk insurance has emerged to address the potential for massive losses due to AI errors. However, the author argues this market may be overhyped. Historically, software errors have existed, yet the market for Technology Errors & Omissions (Tech E&O) insurance remains small. AI insurance faces similar challenges to Tech E&O: difficulty assessing risk, information asymmetry, and risk concentration. The author suggests that AI insurers need superior risk assessment capabilities than their clients and must diversify risks to survive. Currently, AI risk management is more focused on individual application risk control rather than insurance.