Securities class actions are rising, and insurers are watching closely
Artificial intelligence (AI) has emerged as a powerful driver of business growth. Many companies are eager to showcase their embrace of AI to attract capital and boost shareholder confidence.
However, experts warn that a troubling trend – “AI washing” – can create significant exposure for leaders of publicly traded companies. AI washing refers to overstating or outright fabricating a company’s AI capabilities to appeal to investors.
The practice mirrors earlier phenomena that have triggered large lawsuits, such as greenwashing, according to Ray Ash (pictured below), head of financial lines at Westfield Specialty.
“It’s similar to what we saw even during COVID-19, when companies hyped nonexistent treatments or solutions and their stock prices surged, only to crash when the truth came out,” Ash said. “Some companies are claiming AI capabilities they don’t actually have, which can artificially inflate share prices and eventually lead to securities litigation.”