KYND, a cyber risk intelligence provider that helps businesses and insurers understand and manage their cyber exposures, has warned that insurers may be accumulating hidden AI-related risks across their portfolios as organizations deploy AI tools without consistently disclosing their usage.
In our latest white paper, AI Risk West, KYND said the insurance industry’s immediate challenge is to understand more clearly where and how AI is being used, rather than focusing solely on future policy responses.
According to KYND, effective underwriting relies on visibility into customer technology usage, but the speed of AI adoption means some organizations may be integrating AI into their operations before discussing it with insurers. The company said this creates the potential for unidentified exposures at the underwriting stage, which can spread over time across multiple policies and contribute to broader cumulative risk.
Aaron Aanenson, Head of North American Insurance at KYND commented:
“Insurers should prioritize visibility into AI adoption across their portfolios, rather than just focusing on where to place AI in policy language.AI-related claims are already occurring, so understanding those exposures before a claim materializes will be critical to effectively assessing and pricing risk.”
“Without that visibility, insurers run the risk of hidden cumulative exposures, especially when multiple policyholders rely on the same underlying AI platform or model. Identifying those concentrations early is key to building more resilient portfolios.”
KYND said the widespread use of AI tools, including ChatGPT, highlights the scale of the challenge, with 77% of organizations currently using the platform. The company warned that the insurance market could face a problem similar to “silent cyber”, where cyber risk accumulates within insurance policies before insurers are fully aware of its scope and impact.
The white paper also highlights that AI-related disputes are already occurring, including unreliable output, copyright concerns and allegations of bias. However, KYND said insurers continue to face uncertainty due to limited historical claims data, making it difficult to assess the potential long-term impact of AI-related exposures.
A spokesperson for cyber specialist MGA added: “I think the only thing the industry is working on is excluding AI from areas where you don’t want it to be exposed. In the US, we’ve seen a lot of general liability and ISO forms that introduce AI exclusions, but it’s very similar to how they took general liability off the table when cyber came up. What we haven’t fully figured out yet is E&O and cyberspace. How that fits in and what actually gets triggered.”
KYND said that insurers will need deeper insight into AI implementation across their portfolios to identify potential concentrations of exposure, improve risk assessments, and develop more effective approaches to underwriting AI-related risks.
