“Alexa, Am I Covered?” – AI Insurance Protects Startups from Siri-ous Risks

Photo by Tom Dahm

As artificial intelligence technologies proliferate, so too do the risks associated with them. Vouch, a San Francisco-based insurtech company, is aiming to help AI startups navigate the complex legal and regulatory landscape with a new insurance product tailored specifically for the industry.

Dubbed “AI Insurance,” the novel offering provides coverage for a range of risks stemming from AI systems, including financial losses from errors, bias, regulatory actions, and intellectual property disputes.

“The AI industry is insane right now,” said Sophie McNaught, Vouch’s director of AI initiatives, in an interview. “When you’re a typical software company, missing a quarter of progress to a lawsuit is a setback. For AI companies, it’s existential.”

Indeed, AI startups today face a minefield of potential legal troubles. Systems based on large language models like ChatGPT have exhibited concerning biases and factual inaccuracies. Algorithms trained on imperfect data have led to discrimination lawsuits. And thorny questions around copyright and patents abound as AI systems grow more adept at generating content and identifying patterns and insights.

Regulators have taken notice. In December, the Federal Trade Commission warned companies against false or deceptive claims involving AI chatbots, while bills in Congress propose restrictions on types of AI systems. States like Illinois and New York have also enacted laws focused on bias in AI algorithms.

Against this backdrop, Vouch aims to provide a safety net for AI startups to continue innovating rapidly while mitigating risks. The insurance covers defense costs and damages for claims related to errors, bias, intellectual property disputes and regulatory actions.

“Finding an insurance partner like Vouch has been invaluable,” said Kate Wagner, Head of Operations at Roboflow, an AI startup and Vouch client. “Their expertise gives us confidence to focus on innovation, with assurance that we can handle challenges along the way.”

John Wallace, Vouch’s Chief Insurance Officer, said the product was born out of increased demand from AI startups, which now comprise 70% of new customers compared to just 10% six months ago. “We knew the AI industry couldn’t afford to wait years for insurance to catch up,” he said.

The launch aligns with Vouch’s focus on fueling startups through tailored insurance solutions, having raised over $160 million from top Silicon Valley investors. Since 2018, the insurtech has served thousands of high-growth companies.

But offering insurance to rapidly evolving technologies like AI poses risks even for Vouch. “It’s critical we understand the technology and stay on the pulse of legal trends,” said McNaught. “Our goal is to allow responsible innovation, not permit negligence.”

As AI continues marching into the mainstream, companies will need to grapple with emerging risks. For now, Vouch hopes its new offering provides a measure of comfort amid regulatory uncertainty. But in the world of AI, the only real certainty may be continued change.

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