Navigating the Evolving Landscape of AI in Insurance

The integration of artificial intelligence (AI) into the insurance industry is no longer a futuristic concept; it is a present-day reality that affects how brokers, underwriters, and clients navigate the complexities of coverage and claims. With over 700 million people utilizing AI systems weekly, the urgency for appropriate governance and policy frameworks has never been more pressing. Recent findings from Willis's Risk and Resilience review highlight a critical gap: most insurance policies currently in the market were not drafted with AI liabilities in mind. As AI technology continues to evolve and become embedded across various sectors of the industry, brokers must prepare for a paradigm shift in how they approach underwriting and risk management.

This article delves into the implications of these developments, particularly the introduction of the AIQ Score by AIQA Global, LLC, and other market movements that underline the importance of robust AI governance. Brokers must understand the changing landscape and proactively engage with clients about their AI use and associated risks.

Understanding the AIQ Score and Its Importance

AIQA Global, LLC recently launched the AIQ Score, a comprehensive evaluation tool designed to assess the governance quality of AI implementations within enterprises. This score ranges from 0 to 200 and is based on an analysis of 250 factors. According to James E. Malackowski, co-founder and chairman of AIQA, the rapid adoption of AI technologies has outpaced the development of governance frameworks. As Malackowski pointedly remarked, “Self-attestation is not governance.”

The AIQ Score is particularly relevant for brokers, as it will likely become a key metric in procurement reviews, underwriting processes, and regulatory examinations. As AI becomes more prevalent in underwriting and claims management, brokers may soon be required to interpret and present clients' AI governance scores to underwriters. This represents a significant shift in the broker-client relationship, where understanding AI implications becomes paramount.

The Regulatory Landscape: Keeping Pace with AI

The National Association of Insurance Commissioners (NAIC) is responding to the rapid advancement of AI by launching a pilot program for an AI Systems Evaluation Tool across twelve states. This tool is designed to evaluate the governance and conduct of AI systems within the insurance framework. The pilot runs from March to September 2026 and builds on the Model Bulletin on AI systems adopted in December 2023, which has been embraced by 25 states and the District of Columbia, bringing the total number of jurisdictions with AI governance expectations to 29.

This regulatory push signifies that brokers placing business in these states need to prepare for underwriters who will increasingly ask pointed questions about a client’s AI governance practices. As the industry evolves, having a comprehensive understanding of AI policies will no longer be optional; it will be a necessity to ensure clients receive the coverage they need.

The Financial Implications of AI Governance Gaps

The financial ramifications of inadequate AI governance can be severe. Aon recently introduced an AI Risk Diagnostic tool in response to instances where firms without documented AI oversight frameworks faced coverage denials during renewals. This is a clear indication that governance gaps not only invite scrutiny but can also lead to tangible financial consequences for clients and their brokers.

As AI technology continues to evolve, the implications of governance will likely extend beyond just regulatory compliance. For instance, with the EU AI Act's high-risk obligations taking effect in August 2026, U.S. companies may find themselves in a competitive disadvantage if they do not have adequate AI governance in place. Brokers must remain informed about these developments to guide clients effectively.

Market Movements: Key Changes in the E&S Sector

Amidst the evolving AI landscape, the Excess and Surplus (E&S) market is also undergoing significant changes. Old Republic International Corporation has appointed John Paulk as the chief operating officer of its Excess & Surplus unit. This move is significant as the E&S market logged $47.6 billion in premiums across 15 stamping-office states in the first half of 2026, marking a 2.8% year-over-year increase. However, while property rates are softening, liability lines are hardening, leading to varied negotiating positions for brokers managing clients’ accounts.

Understanding these dynamics is crucial for brokers as they navigate their clients' needs in a challenging market. The complexity of the E&S landscape necessitates that brokers stay informed about which lines are moving and how quickly, ensuring they can recommend the best strategies for their clients.

Claims Management and International Expansion

Crawford & Company, the leading independent provider of claims management and outsourcing solutions, recently expanded its operations in Colombia by incorporating the professional team from Asegúrate. This move reflects Crawford's long-term confidence in the Colombian insurance sector and highlights the importance of having robust claims-handling capabilities in Latin America.

For brokers with clients holding exposure in Latin American markets, this expansion is a critical factor in market selection. Andrew Bart, CEO of International Operations at Crawford, emphasized that the addition of local expertise strengthens the company's overall claims management capacity, which is increasingly important in a globalized economy.

Key Takeaways

• AI Governance is Essential: Brokers must be prepared to discuss and document clients' AI governance practices as regulatory scrutiny increases.
• Financial Consequences: Gaps in AI governance can lead to coverage denials and significant financial losses for clients.
• Market Awareness: Understanding the dynamics of the E&S market is crucial for brokers managing diverse client portfolios.
• International Developments Matter: Expanding claims management capabilities in regions like Latin America can be vital for brokers with global client exposure.
• Proactive Engagement: Brokers should proactively engage with clients about their AI use and governance frameworks to avoid potential pitfalls.

Frequently Asked Questions

What is the AIQ Score, and why is it important?

The AIQ Score is a new measurement introduced by AIQA Global that evaluates the governance quality of AI systems within enterprises. Ranging from 0 to 200, it assesses 250 different factors related to AI governance. This score is becoming increasingly important for brokers as it may be required for procurement reviews and underwriting processes, reflecting the need for transparency and accountability in AI usage.

What are the potential consequences of inadequate AI governance?

Inadequate AI governance can lead to significant financial consequences for businesses, including coverage denials during policy renewals. As seen with Aon's AI Risk Diagnostic, firms lacking documented AI oversight frameworks are facing increased scrutiny and, in some cases, are being denied coverage altogether. This highlights the critical need for businesses to establish strong governance practices around their AI systems.

How are regulatory bodies responding to the rise of AI in insurance?

Regulatory bodies, such as the NAIC, are actively addressing the implications of AI in the insurance sector by implementing pilot programs aimed at evaluating AI governance. With more states adopting AI governance requirements, brokers must stay informed about regulatory changes to ensure they can effectively guide their clients through compliance requirements and potential risks.

Why is the Excess and Surplus (E&S) market significant for brokers?

The E&S market is significant for brokers because it provides coverage options for risks that are not typically offered in standard insurance markets. With varying trends in property and liability rates, brokers must navigate this complex landscape to ensure their clients receive the appropriate coverage. Understanding the shifts in the E&S market allows brokers to make informed decisions and recommend strategies that align with their clients' needs.