Artificial Intelligence is here to stay, and the corporate world is quickly adjusting to the new dimension it adds to their businesses, especially in terms of insurance, risk coverage, and advertising strategies.
The fear of malfunctioning AI continues to spread as people grow more dependent on conversational AI. However, the dependence creates an opportunity for some agencies who have started offering new services to brands who want to maintain visibility and protect themselves from liabilities.
AI insurance policies are becoming a new coverage area
Insurers at Lloyd’s of London recently introduced a new insurance product to cover losses that stem from AI chatbot errors, such as inaccuracies or “hallucinations” where AI generates incorrect or misleading information.
The policies were reportedly developed by Armilla, a start-up backed by Y Combinator, and they aim to mitigate financial risks for companies that have taken the leap and started deploying AI chatbots.
Coverage will include costs like legal fees and court damages if AI tools underperform or cause harm, addressing growing concerns among business owners about the reliability of generative AI systems.
The insurance will be underwritten by several Lloyd’s insurers. It will also have provisions for things like damages payouts and legal fees. The development is much needed, given the proliferation of AI in almost all major industries.
Karthik Ramakrishnan, Armilla’s chief executive, believes the new product could encourage more companies to adopt AI, since it prepares for the eventuality of an AI messing up.
Some insurers have already started including AI-related losses within general technology errors and omissions policies, but these often include low limits on payouts.
While it is true AI language models “learn” over time, losses from errors caused by this process of adaptation would not normally be covered by typical technology errors and omissions policies, according to Logan Payne, a broker at Lockton.
In fact, a mere mistake by an AI tool is not enough to trigger a payout under Armilla’s policy. Instead, the coverage only becomes effective if the insurer determines that the AI’s performance was below initial expectations.
For example, Armilla’s insurance payout can be triggered if a chatbot gives clients or employees correct information only 85% of the time, after initially performing at 95%.
“We assess the AI model, get comfortable with its probability of degradation, and then compensate if the models degrade,” Ramakrishnan says .
It is also crucial to note that Lloyd’s, which is underwriting the policies sold by Armilla, will not sign policies covering AI systems they‘ve determined to be excessively prone to breakdown.
“We will be selective, like any other insurance company,” Tom Graham, head of partnership at Chaucer, an insurer at Lloyd’s, said.
A new era of search engine optimization and ad spending
As more people increasingly pivot to using AI chatbots like ChatGPT, Claude, and Perplexity for information, brands and advertising agencies have also started adapting their strategies to maintain visibility and stay relevant.
The shift, facilitated by younger consumers and the convenience of getting answers from conversational AI, marks a new era of search engine optimization (SEO) focused on AI-driven platforms rather than traditional search engines like Google.
This shift has altered user behavior, especially among Gen Z, who seem to prefer AI chatbots and social media platforms to Google’s link-based recommendations. For example, 46% of Gen Z use social media, and 31% use AI platforms for searches, compared to 42% and 20% of the total population.
It has reflected in Google’s search market share, which dropped below 90% for the first time since 2015, with AI-driven tools like ChatGPT projected to claim 1% of the search market in 2025.
The shift presents an opportunity for some agencies to offer new services to brands that want to maintain visibility, especially within the results generated by AI services.
One such example is Brandtech, which has created a “Share of Model” product that profits from allowing brands to see similar analysis and offering guidance on adjusting website text and image assets to better serve AI search.
Profound is another agency that offers a data analytics platform that helps brands track common queries related to their industry and understand their performance in AI searches.
However, despite all the new developments, Google has remained dominant, with its search and advertising business growing nearly 10% to $50.7 billion in Q1 2025.
Those strong results served as reassurance to investors concerned about the growing popularity of rival AI chatbots, but industry observers say the new age has already begun.
James Cadwallader, co-founder of Profound called it a “CDs to streaming moment” and even though it took some time for CDs to actually go out of commission, it eventually happened.
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