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Insurers struggle to track vendor AI use, raising third party risk
A survey found 72% of institutions were only partially aware of whether vendors use AI, and 9% had not assessed vendor AI at all.
Insurance carriers face a growing third party risk linked to AI governance gaps, as many cannot identify which outside vendors are using artificial intelligence, according to Insurance Business, citing Ncontracts's 2026 State of Third-Party Risk Management Survey.
The survey results showed 72% of institutions were only partially aware of vendor AI use, while 9% had not assessed it. Baker Tilly partner John Romano said this blind spot can become riskier for carriers than the AI technology itself, especially when vendors use AI in pricing, coverage decisions, claims handling, severity scoring, or fraud triage.
Romano contrasted low risk versus high risk uses, noting that an MGA using generative AI to summarize claims files sits lower on the risk scale than a partner running proprietary models to make decisions that can affect price, coverage, claims outcomes, fraud detection, or certain regulatory bound customer communications.
He also highlighted an example of an AI error, where an insurance chatbot approved a claim at the wrong figure, ten times too large, triggering costly back and forth. The article also points to Grant Thornton's 2026 AI Impact Survey of 950 executives, which found over half reported boards had set AI governance policies, but 44% said governance and compliance gaps contributed to project underperformance, with Romano arguing carriers should start with a detailed inventory of vendor AI and where humans remain in the loop.