Case study: Development of customized IT liability insurance for AI software developers
Initial situation
A European game changer for AI software was faced with the challenge of finding a suitable IT liability insurance policy that covered both the specific risks of its AI-based software solutions and the services offered. The particular dynamics of their business field - from rapidly evolving technology to new regulatory frameworks such as the EU AI Act - made a standard solution impossible.
Challenges
The development of a suitable insurance solution was characterized by several specific challenges:
- Insurers have so far had little or no experience with claims from large AI software developers and have therefore often been reluctant or cautious when designing corresponding policies.
- Lack of precedents for claims and no case law yet due to the very new EU AI Act, which will significantly change the regulation of AI technologies.
- Dynamic technological development and rapid changes in the client's activities require very open, flexible insurance cover in order to also cover future activities and risks.
- International business activities require worldwide insurance cover.
- Many insurers often exclude software that serves industries such as defense, production control, social media and many more. Due to the wide range of possible applications of AI technology, the exclusions here must be examined particularly carefully.
Our solution approach
To meet these challenges, we developed a modular insurance solution that was individually tailored to the needs of the AI company:
- Basic cover for classic IT risks:
We chose an open financial loss cover that insures everything that is not specifically excluded. This approach offered the client maximum flexibility, in contrast to the traditional approach of insuring specific company activities. - Reinclusion of certain (excluded) sectors:
Through targeted negotiations with the insurers, we were able to limit blanket exclusions to the actual risks that the insurer did not want to cover - for example, defense companies are excluded, although the insurer actually only does not want to offer protection for weapons systems. - Flexible adaptation options:
We negotiated with the insurers that changes in case law, particularly with regard to the EU AI Act, could be taken into account in advance and flexibly incorporated into the wording.
The implementation
The insurance solution was implemented step by step in close consultation with the customer, taking into account the following factors
- Comprehensive risk analysis and assessment:
Together with the client, we analyzed the specific risks of their AI technology and services in detail.
Negotiations with insurers: Based on the risk analysis, we negotiated the scope and limits of cover by tendering on the market and with the insurers that offered the best cover. - Premium design: proactively design
on the basis of planned sales development in order to set degressive premium rates in advance. - Claims management process:
Together with the client's legal department, we developed a clear claims management process. This ensures that potential claims can be processed efficiently.
The results
The insurance solution developed comprehensively met the client's requirements and achieved the following results:
- Comprehensive protection for AI-specific risks.
- Competitive premiums.
- High customer satisfaction due to the efficient negotiation process.
Our customized approach enabled us to develop an insurance solution that not only covers the client's specific risks, but also takes future challenges into account. Our expertise in negotiating with insurers and designing flexible policies made it possible to implement innovative, cost-efficient and comprehensive cover.
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