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Insurance for AI Risk: Is It Time to Consider AI Liability Coverage?

4 min read

Insurance for AI RiskOver the past few years, artificial intelligence (AI) has evolved from a futuristic concept into a core engine of modern enterprise strategy. Organizations across every major industry are now using AI to automate complex workflows, augment customer service operations, drive predictive decision-making, and unlock greater operational productivity.

Understanding AI Risk

AI is not an easily defined category, as it spans several dimensions that traditional risk frames are not built to accommodate. The Gallagher report, Smart Systems, Blind Spots: Rethinking Insurance for the AI Era, found that the pace of AI adoption surpassed the insurance industry’s capacity to develop responsive products.

What makes AI unique is that risks associated with it emerge from the way systems learn, generate outputs, and make decisions to influence customers, employees, and business outcomes.

Modern businesses face several distinct risk vectors:

  • Biased or discriminatory decisions
    Automated recruitment, lending, or credit-scoring models trained on flawed data can produce systematically unfair outcomes. This can result in regulatory penalties, civil rights litigation, and damaged brand reputation.
  • Hallucinations and inaccurate outputs
    AI models can confidently generate inaccurate or misleading information. A customer-facing AI assistant that provides incorrect financial, legal or medical guidance could create significant liability exposure.
  • Intellectual property and copyright disputes
    Models trained on vast, unvetted datasets reproduce copyrighted material, exposing organizations to costly intellectual property infringement claims.
  • Data privacy violations
    Unintentional exposure of proprietary trade secrets or personally identifiable information (PII) during model training can trigger regulatory investigations under frameworks such as the EU AI Act, the General Data Protection Regulation (GDPR), or state-level privacy laws.
  • Cybersecurity vulnerabilities
    AI introduces new attack vectors, including prompt injection, data poisoning, and model extraction. Malicious actors can exploit these to compromise business integrity.
  • Financial losses
    Autonomous trading agents or algorithmic pricing models operating at high speeds can execute erroneous transactions, leading to immediate financial losses.

Why Traditional Insurance May Not Be Enough

Existing coverage was not designed for current AI issues. Cyber policies were designed around data breaches and network intrusion. This does not cover an AI model making a biased hiring decision or fabricating a financial projection.

Professional indemnity and E&O policies assume a human professional exercised judgment. So, when an algorithm makes a mistake, an insurer may dispute whether the policy was intended to respond. For general liability policies, the focus is on bodily injury and property damage. If an AI program causes bodily injury, insurers can debate whether the policy applies.

Several incidents have caused some insurance companies to exclude AI from their corporate policies. For instance, Google was sued by a Minnesota-based company after its AI Overviews feature named it as a defendant in a lawsuit. This is just one case that highlights the growing concern around “silent insurance” when policies do not explicitly address AI-related risks. However, businesses may assume they are covered when they are not.

The challenge is compounded by the rapidly evolving legal landscape, with governments worldwide introducing new regulations.

The Rise of AI Liability Coverage

In response, a new category is beginning to take shape. This is AI liability insurance. These policies are designed to explicitly address the development, deployment, and use of AI systems. While offerings may vary across providers, AI liability covers incidents such as AI-driven discrimination claims, IP infringement from generative outputs, financial losses from automated decision-making, and regulatory penalties tied to AI non-compliance.

Insurers are approaching underwriting as they did with early cyber policies. They are starting cautiously, requiring detailed disclosure of how AI is used, existing governance controls, and how models are tested and monitored.

Beyond Insurance: Building Comprehensive AI Resilience

Insurance alone cannot eliminate AI risk and should not be a substitute for operational resilience. Organizations building genuine AI resilience are investing in:

  • Formal AI governance frameworks
  • Meaningful oversight of consequential decisions
  • Ongoing model monitoring and auditing
  • Employee training on responsible AI use
  • Clearly articulated responsible AI principles
  • Tested incident response plans specifically for AI-related failures.

A well-governed AI program will also make a business significantly more insurable, as underwriters increasingly price risk based on demonstrated controls.

Conclusion

AI has become one of the greatest sources of competitive advantage as well as a new source of liability. As regulatory scrutiny increases and AI-driven decisions become more consequential, executives must broaden their understanding of enterprise risk. Insurance should not be viewed as a substitute for governance, oversight or responsible AI practices.

For businesses increasingly relying on AI, the question is no longer whether AI creates liability risk, but whether existing insurance is equipped to respond to it. 

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How to Keep Your Cash When You Make Good Money

4 min read

How to Keep Your Cash When You Make Good MoneyYou’re doing well, earning a good salary. But somewhere around the latter part of the month, after you’ve paid your obligations and basically lived your life, which isn’t extravagant, you look at your checking and savings accounts, and well, there isn’t much there. And that sinking feeling starts to kick in. Sound familiar?

This is called lifestyle inflation. In a nutshell, the way you spend increases over time in relation to your rising income, so your financial floor rises right along with it. In fact, according to a Federal Reserve Survey of Consumer Finances, households that earn between $100,000 and $200,000 are in sizeable credit card debt, have retirement accounts that need help, and very little savings in relation to their income. What to do? Here are a few ways to get a handle on this.

Get a real number. You might have all your expenses in QuickBooks or the like and, on paper, you look good. But to get a real picture of how you’re doing, calculate the expected net worth you should have for someone at your age with your salary: Multiply your age by your salary, then divide it by ten. If your net worth is below half that number, something’s not adding up. Pun intended. The next critical step: Subtract your liabilities from your assets. This might not feel good, but from this you’ll instantly see what you can affect and change.

Pinpoint the source of your lifestyle inflation. It might not be huge expenses, but little pricey purchases over time that are causing you to feel financially squeezed. Go to your spreadsheet and take a look at the last three years and compare. See where you’ve spent more, calculate the difference, and there’s your answer. Areas to consider are housing, dining, subscriptions and services, travel, gifts, clothing, etc. Don’t make drastic changes all at once, as you might rebound and splurge. Just try to reduce your spending in the areas with the biggest deltas. Give yourself 60 days. Easy does it for lasting change­. This might be a smart mantra.

Set up intentional constraints in certain areas. As mentioned above, you don’t need to become a fiscal conservative. Just look at the areas where things feel a bit…much. Here are three principles to work with:

  • Decide on savings and investment allocations for payday. There are non-negotiables you can put on auto-draft. If you don’t see it, you won’t miss it.
  • Determine a set number for each category. But approach these numbers as conscious decisions, not as a way to restrict yourself. You’re choosing not to spend $500 on dinner each week because in relation to the rest of your goals, this makes sense.
  • Set up a discretionary account. You know, fun money. This is a fixed monthly transfer amount without overdraft protection. When the money’s gone, it’s gone. This isn’t a way to frustrate or shame yourself; you just have a real window into what you’re spending, rather than some vague notion. This creates real clarity.

Reimagine your social spending. We’re talking dinners out with friends, group trips, or even the things that just feel normal, like wedding and birthday gifts. This might be the hardest part of all. So here’s a tip: Don’t let these things sneak up on you. Plan for these events in advance and give yourself a price range to stay within. This way, you stay on track and don’t miss out on important moments.

The truth is that your income might well continue to increase. You’ll get that raise and bonus. So instead of living it up and spending with wild abandon, try this: for every raise or bonus, put at least 50 percent of the net increase toward savings or investments before changing anything about your lifestyle, i.e., buying that new car, etc. The other 50 percent? Make intentional choices about how you want to spend. Conscious decisions pay off in the long run. And best of all, you won’t continue to feel broke.

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Bond Investment Strategies

5 min read

Bond Investment StrategiesBonds are designed to deliver both capital preservation and income, and are generally considered lower risk than stock investing. The purchase price of a bond is basically a loan to an issuer, such as the federal government, a municipal government, or a corporation. The term of the loan is determined for a specific period of time – referred to as the maturity date.

During that time, the issuer uses bond money to fund projects, and in return pays the buyer interest over the term of the loan. Once the term ends, the bond issuer pays back the money it borrowed (i.e., the purchase price). The interest is paid on a predetermined schedule – quarterly, semiannually, or annually. The interest rate on a bond is called the coupon rate, and it is fixed at the time of issuance and remains the same until the bond matures.

For example, say you purchase a 10-year bond for $10,000 with a coupon rate of 4 percent, paid twice a year.. Over the 10 years you’ll collect $4,000 in interest, and at maturity you get your $10,000 back. That’s a 40 percent cumulative return on the original investment.

Bonds with a maturity date of less than four years are considered short-term; between four and 10 years are considered intermediate-term bonds; and terms of 10 or more years are considered long-term bonds. Bonds can be useful in many ways, such as to provide income, save for a particular expense, or to seek out high interest rates for a higher total return. The following are a few bond strategies to address each type of objective.

Objective: Generate Income

To generate income over a long period of time – when interest rates tend to fluctuate – one strategy is to ladder bond holdings. This means purchasing a portfolio of individual bonds with varying maturity dates. For example, you may spread out your bond terms from one to 30 years – with each interval acting as a rung on this metaphorical ladder. Note that each type of bond is rated for the credit quality of the issuer, which reflects its likelihood of default. The lower the credit rating, the higher the interest paid to compensate for the issuer’s extra risk.

As each bond matures, you can reinvest money into another bond based on the current prices and coupon rates on offer at that time. This way you may continue to shop for higher coupon rates every few years without locking up all of your money for a 10-, 20-, or 30-year duration. When rates are on the rise, you can secure a higher yield as your bonds mature. If rates are falling, reinvest that money in a short-term bond as a holding pattern until coupon rates increase again. This way, you continue to benefit from owning longer-term bonds purchased when rates were higher. Barring any defaults, the ladder continues to grow and offer steady growth for bond assets.

Objective: Save for a Particular Expense

The Bullet strategy is a simple way to generate the money you need for a specific financial goal within a specific time frame – such as buying a house in five years, or saving for college or a retirement nest egg in 10 or 20 years. You basically purchase bonds with a similar maturity date. Between the purchase price and the generated income, you’ll know exactly how much you will receive when those bonds mature. It’s like shooting a bullet straight toward your financial goal.

Objective: Seek Higher Interest

The Barbell strategy splits your money between the two ends of the maturity range and skips the middle. You hold short-term bonds on one end and long-term bonds on the other, with little or nothing in between, much like the weights sitting at either end of a barbell.

The long end captures the higher coupon rates that generally come with committing money for a longer period. The short end keeps a portion of your money coming due on a regular basis, so each time one of those bonds matures, you can re-evaluate rates and decide where that money goes next. If rates have moved higher, shift it to the long end and lock in the better coupon. If rates remain tepid, buy another short-term bond and wait. The result is a portfolio that captures much of the yield available at the long end without committing everything to a rate you may later regret.

There are many different types of bonds, including federal government, municipal government, and corporate bonds. While government bonds are generally considered safe, each bond is issued a credit rating based on the issuer’s financial health, creditworthiness, and past history of repaying debt obligations. Investors also have the option to invest in bond funds, which offer a large selection of bonds and do not require investments to be held to maturity. However, bond fund interest rates fluctuate daily, and there is no guarantee the investor will receive the original principal amount when they cash out of the fund.