Lloyd’s of London, through the startup Armilla, has launched a new insurance product aimed at companies facing risks from AI-related malfunctions, such as errors and hallucinations in systems like chatbots. This development comes as the adoption of AI increases, alongside concerns about the potential for costly mistakes and reputational damage caused by underperforming AI that may confidently provide incorrect information. The insurance policies are designed to cover legal costs if a company is sued due to harm caused by its AI product’s technical failures. The introduction of this insurance underscores the real-world technical challenges in building and deploying reliable and consistently predictable AI systems, particularly regarding accountability when AI errors occur.

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