Lloyd's of London launches insurance product for malfunctioning AI
13/05/2025 | Financial Times
Insurers at Lloyd's of London have introduced a new insurance product designed to protect companies from financial losses resulting from malfunctioning artificial intelligence (AI) tools. This initiative reflects the insurance sector's ambition to capitalise on growing concerns about the potential for costly hallucinations and errors generated by chatbots.
The policies, developed by the Y Combinator-backed start-up Armilla, will cover the expenses associated with court claims filed against a company by customers or other third parties who have experienced harm due to the underperformance of an AI tool.
The article highlights that while some general technology errors and omissions policies may include AI-related losses, they typically impose low payout limits for AI-related liabilities. However, under Armilla's policy, a simple mistake by an AI tool would not automatically trigger a payout. Instead, coverage would only be activated if the insurer determines that the AI tool's performance fell below initial expectations.
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