On a recent episode of Hot Topics on the Edge of Show, Claire Davey of Relm joined the hosts to explore how insurers are approaching fast-evolving technologies. In the final segment, Claire offers insights on artificial intelligence, highlighting the risks of ambiguity in coverage, the importance of affirmative policies, and why clarity and trust between insurers and insureds are critical as businesses navigate uncertainty, including legislation like the EU AI Act.
This follows Claire’s earlier appearance on the Edge of Show, where she discussed fintech, risk, and innovation, read more in this post: Fintech, Risk and Innovation – Claire Davey on Edge of Hot Topics.
Relm is a different egg when it comes to how you guys [Relm] are looking at insurance. What are some of the challenges overall in the insurance industry and how they’re tackling this new emerging technology?
Yes. The main approach that we’re seeing at the moment in the insurance industry is to remain silent, which means that there’s no affirmative coverage and insurers are hedging their bets as to whether they’re going to pay on those claims or not. That’s not really a position that we want to take. We’d rather be affirmative about it, which is why we released our product.
That was the whole problem with the last 10 years of blockchain governance. They left it ambiguous and that was really difficult to run a company in that ambiguity.
Correct. And we saw it even before that with just cyber coverage. We had this whole debate around silent cyber exposure that the regulators in Europe and the UK cracked down on. So, we’re going to see that again with regards to AI and go through that journey as an insurance industry and insureds. Let’s just hope that claims and insureds don’t get caught up in that. I’d rather they gain affirmative coverage from their insurers.
Historically, do the courts typically lean towards the favor of the insured or the insurance company when there’s a lot of ambiguity?
That really depends on the jurisdiction of where the policy is governed. In more insured-friendly states, particularly in the US, you’ll find that any ambiguity will be found on behalf of the insured. Other states which are more punitive and more business-friendly will then find on behalf of the insurer.
Ultimately no one wants to get to that position. The insurers don’t, insureds don’t, because at that point relationships have broken down and there’s a large amount of cost involved in that dispute. Ultimately, insurers want to be there to pay claims. They want that partnership. Relm certainly does. It doesn’t help anyone if their name is in the press to suggest that they are not holding up on their half of the intent of the contract.
At the end of the day, insurance is all about trust. That peace of mind with a particular product provides the clarity that is needed to just do your thing, run your business and focus on maximizing profit and shareholder value, particularly when the risk is so unknown or still emerging as it is with AI technologies.
For instance, although the EU AIA has been implemented, a lot of companies don’t quite know yet what that’s going to mean for their operations, whether there’s going to be audits, what happens if they’re investigated, what the fines and penalties are, how punitive they’re going to be, and yes, we know the ballpark calculations.
But I think offering some form of certainty, safety net and reassurance to the board or your balance sheet that in a worst-case scenario, in those times of uncertainty, there is a financial backstop to help, is invaluable. Why cloud that or muddy the waters with ambiguous language would be my challenge.
