Who is liable for Artificial Intelligence?

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An increasingly digitized society is facing rapidly emerging risks as decisions made by algorithms and artificial intelligence (AI) are playing a larger role in everyday life. In a whitepaper, the Zurich Insurance and Microsoft detail the growing notion of AI algorithmic risk and suggests ways risk managers and insurers can manage it.

A recently released whitepaper, “Artificial Intelligence and Algorithmic Liability – A technology and risk engineering perspective” (download here)  Zurich Insurance and Microsoft point out that unleashing the power of data and artificial intelligence creates “endless business opportunities to ultimately improve the quality of our lives.” But with those opportunities, the report warns, comes a “broad spectrum of risks encompassing not only regulatory compliance, but also liability and reputational risk if algorithmic decision-making triggers unintended and potentially harmful consequences.”

The analysis includes an in-depth look at relevant cases in the areas of product liability, professional indemnity and medical malpractice that can provide guidance in minimizing the exposure and potential harm to customers and an organization’s reputation.

What is AI algorithmic risk?

The risk is defined by the paper as arising from the use of data analytics and cognitive technology-based software algorithms in automated and semi-automated decision-making. If the algorithms fail to perform as expected, the result can be losses from property damage, business interruption, personal injury, professional liability, medical malpractice, and cyber exposures.

Managing AI algorithmic risk is particularly important because there are few insurance products that will cover it. The insurance industry is just beginning to understand the risk and develop coverage that will address it, according to the report, because of a lack of loss experience data and models that can estimate the frequency and severity of potential losses.

Why do insurers and tech companies collaborate?

All in all, Technology companies and insurers can work together to help mitigate emerging AI algorithm risks across industries. Insurers such as Zurich have a long history of encouraging use of best practices and finding innovative solutions to unfamiliar exposures, while technology companies like Microsoft bring firsthand insight into cutting-edge methods to reduce risk from development through deployment of complex systems. “Microsoft has adopted six responsible AI principles to guide technology developments and operations: Fairness, Reliability and Safety, Privacy and Security, Inclusiveness, Transparency, and Accountability,” says Franziska-Juliette Klebôn, Data & AI Lead at Microsoft Switzerland.

Especially Microsoft’s perspective on responsible AI in financial services provides a comprehensive list of tools and methodologies for mitigating AI risks. This cross-industry collaboration can help raise public confidence and trust in these systems that are increasingly becoming part of all our lives.

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