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First published in the Forum of Insurance Lawyers' (FOIL) 'The Voice May 2025'
This article was co-authored by Mya Wilhelm, Trainee Solicitor.
This piece explores silent AI within the professional indemnity insurance space. It highlights the hidden risks of AI that insurance policies may not explicitly cover, and identifies risk mitigation strategies to address these AI-driven exposures.
Silent AI in Insurance
Whilst AI offers opportunities to improve efficiency and assess risk, it also presents challenges, including the potential for Insurers to face unintended liabilities . ’Silent AI‘ refers to AI-driven risks that are neither explicitly included nor excluded in insurance policies, leaving room for potential coverage gaps. This ambiguity can lead to significant financial losses for insurers. Avoiding these unforeseen claims should be to be a priority for PI underwriters.
Silent AI is akin to the existing issue with ‘silent cyber’. Silent cyber concerned a rise in cyberattacks, whereby insurers faced growing numbers of claims made under non-cyber insurance policies, simply because they had not explicitly excluded or included coverage of cyber-related incidents. Likewise, as AI is still new and constantly developing, a similar discrepancy between what is happening and what insurance policies are including has arisen.
The Challenges of Silent AI within Professional Indemnity
- Undetected Errors and Liability Disputes
AI is commonly used to analyse data and make recommendations, although if a professional follows an AI-generated recommendation without sufficient scrutiny, questions arise over who is responsible if this advice is incorrect - the professional, the AI developer, or both. Insurers need to assess whether such risks fall for cover under their existing policies.
- Bias and Discrimination
AI systems trained on biased data can produce discriminatory outcomes, so it is essential that insurers evaluate whether their policies account for liability arising from biased AI outputs. Silent AI makes it difficult to trace the origin of such biases, further complicating liability and remediation efforts.
- AI as ‘Professionals’
Whilst professional indemnity policies traditionally cover errors made by human professionals, as AI tools continue to take on advisory roles, the line between AI as a software tool and AI as a ‘professional’ becomes blurred. This creates a grey area between the trigger of professional liability and the product liability cover.
- Policy Exclusions and Coverage Gaps
Many professional indemnity policies may not explicitly cover AI-related errors or omissions. If AI causes a loss, insurers may argue that the claim falls outside coverage, leaving professionals exposed to significant financial risks.
The Future of Silent AI
Due to the increasing presence of AI in the insurance industry, insurers must regularly review and update their policies to explicitly define AI-related exposures. This includes clarifying whether errors caused by AI would fall within traditional professional indemnity coverage, or whether this requires specialised endorsements or wordings. Insurers will need to ask insureds more questions about their use of AI tools, and in the event of an issue arising, about the surrounding processes, in order to determine whether there has been a ‘human error’ that might be covered.
These concerns inevitably highlight the need for robust governance and regulation, ensuring that AI-related risks are managed appropriately by the insurance industry. On 29 March 2023, the UK Government set out its current position in its AI Regulation White Paper, which reinforces that the UK’s regulatory framework will adopt a ‘context-specific’ approach. The aim of this is to allow regulators to respond to AI risks in a proportionate manner, whilst avoiding an unnecessary blanket approach. Although the UK does not currently have a central AI regulator, on 4 March 2025 the Artificial Intelligence (Regulation) Private Members’ Bill was re-introduced into the House of Lords, and if enacted, will introduce a new regulatory body, the ‘AI Authority’.
Conclusion
Silent AI presents a growing challenge in the insurance space, and it is therefore key at this stage that insurers actively participate in developing industry standards for AI risk management and collaborate with regulators to ensure alignment with evolving guidelines.
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Insurance and reinsurance
United Kingdom