Why are businesses willing to pay more for insurance with AI protection?

Demand is strongest amongst the technology and financial sectors.

More than two-thirds of businesses were willing to pay at least 10% higher premiums for policies that explicitly include Generative AI (Gen AI) risks, according to a new report by the Geneva Association.

Over 90% of respondents said they need insurance coverage specifically for AI or Gen AI threats. 

The rapid adoption of Gen AI is driving businesses to seek new types of insurance as they face rising operational, ethical, and cybersecurity risks.

The report found that companies are increasingly integrating Gen AI into customer services, product development, and internal operations. 

However, this has led to new exposures such as defective AI outputs, biased recommendations, intellectual property infringements, and cyber threats (especially when AI systems produce false or copyrighted content).

Despite the promise of Gen AI, many companies face implementation challenges such as talent shortages, poor data quality, and internal resistance. 

Across all markets, cybersecurity is the top concern, cited by more than half of respondents. 

Other major risks include third-party liabilities and operational disruptions. Reputational damage ranked lower, though experts warned it could have lasting effects.

Demand is strongest amongst medium and large companies, particularly in the technology and financial sectors. 

Firms with prior AI-related losses or higher exposure levels showed the greatest interest, suggesting a risk of adverse selection.

For insurers, underwriting Gen AI risks poses new challenges. 

The report noted that verifying how companies manage AI risks is difficult, leading to potential information asymmetry. 

As a result, insurers may limit coverage or adopt cautious pricing, similar to the early stages of cyber insurance.

In response, insurers are adjusting cyber and liability policies to include Gen AI-related losses. 

Some are testing parametric triggers and due-diligence protocols to improve underwriting and claims processes. 

A few are also developing standalone AI insurance solutions that bundle multiple coverages under one policy, though this market remains nascent.

The report urged insurers to act early by defining Gen AI risk boundaries, piloting modular policy extensions, and working with technology providers and regulators to co-develop risk assessment frameworks. 

The Geneva Association surveyed 600 corporate insurance decision-makers across China, France, Germany, Japan, the UK, and the US to assess business awareness and demand for AI-related insurance. 

Gen AI adoption is widespread, but enthusiasm varies by region. Businesses in China and the US report the highest levels of confidence and perceived usefulness, reflecting their advanced digital maturity.