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Chatbots Can Go Awry. Is There an Insurance Hedge for That?

October 10, 2025 | 4 minutes reading time | By David Weldon

Innovative strategies emerge as the risks of generative AI raise concerns about legal liability outside of what conventional cyber policies cover.

If artificial intelligence is prone to errors or hallucinations, what is to be done when they cause a medical misdiagnosis? A patient’s suffering aside, who bears – or covers – the potential liability of an errant chatbot?

Diagnostic errors are a leading cause of “preventable harm” in primary and emergency healthcare settings, but as a risk case, it can be illustrative of any number of AI applications in finance or other business sectors. Accompanying the vaunted benefits of generative AI, Carlos Rodriguez Sanz and Stéphane Vauterin of AXA XL have written, are multiple challenges including data security vulnerabilities, regulatory concerns and reputational risks.

“As a result, a critical issue facing nearly all large companies today is ensuring that the power of AI is harnessed responsibly and sustainably,” says their April 2025 article. They outlined “three broad categories of threats for companies to consider as they integrate different AI-powered tools into their operations”: adversarial threats from malicious actors; situational or internal threats when AI is incorporated into business operations; and external and...

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Topics: Model Risk, Data & AI Model Governance

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