Insurance News magazine June/July 2026
Robo-claims pain
Widely accessible AI is having an unwanted impact on management liability, Arch says
By John Deex
Rapidly evolving AI is contributing to a rise in management liability claims, as employees use the tech to enhance cases and criminals deploy it to carry out fraud.
Louise Lumley, head of executive assurance at Arch Insurance Australia, says employment practices liability scenarios such as unfair dismissal and discrimination are rising fast across all sectors.
From a claims perspective, the shift is not just in volume but in how matters are being presented.
“We are now seeing applications that are longer, more structured and more legally framed – even from self-represented applicants,” she tells Insurance News.
“There’s a notion that some claimants are using AI to make unsubstantiated claims against employers sound more realistic.”
Rather than creating entirely new types of dispute, AI is lowering the barrier to entry and changing how claims are prepared.
Arch says it is effectively democratising legal drafting, allowing applicants to articulate grievances in a more formal and persuasive way.
“It’s becoming more difficult to distinguish between what’s a genuine claim, and what has been enhanced by AI,” Ms Lumley says.
“The practical challenge for claims teams is that better-presented applications do not necessarily equate to stronger underlying merit, making it harder to distinguish between substantiated grievances and AI-enhanced narratives.
“Claims costs are going up because of that, but I don’t think the average workplace has become worse. If anything, it’s become a lot fairer. What’s changed is the increased access to tools and opportunities to make the claims in the first place.
Ms Lumley says crime claims, such as social engineering fraud, are also increasing.
“That has been on the uptick for a while, because of how the technology can be used to impersonate people’s voices, people’s emails, making them look really quite realistic.”
And employee fraud is on the up, partially driven by cost-of-living pressures. Ms Lumley says the correlation is clear, although it’s hard to categorically prove the link.
“People who would otherwise never dream of defrauding their employer may find themselves in desperate situations, where they might behave in ways they wouldn’t have otherwise.
“That’s something that is often seen as inflation rises and interest rates rise – those types of claims increase.”
While claims are going up, premiums are still going down, as soft market conditions continue.
Ms Lumley says for the past two years “an influx of capacity” has come into the market and rates are under pressure, with directors and officers affected first, but management liability not far behind.
“We’re seeing that a lot of traditional large D&O markets have looked to management liability to provide additional avenues for growth,” she says.
Ms Lumley says “margin is being eroded pretty quickly” and rates can’t continue falling for much longer, although she declines to put a precise timescale on how long the soft market has yet to run.
During the soft phase of the cycle, brokers gain more influence as insurers battle for their attention, and Ms Lumley says the “dynamic shifts pretty substantially”.
Intermediaries demand sparkling service, fast turnarounds and excellence in claims – but this doesn’t unsettle Arch. Ms Lumley says brokers are reassured by Arch’s expertise, purpose-built products and global scale.
“It’s critical that the market has the necessary specialist knowledge to be able to develop and deliver the most relevant and effective solution to the client,” she says.
“At Arch, we have been focused on ensuring that our coverage aligns with customer needs, ensuring that wordings are updated as required, that there is clarity around coverage, and that we ensure our policies are user-friendly for brokers.”
Examples include cyber cover in D&O and crime claims, and a privacy interference extension to address Privacy Act reforms.
Claims service is vital, and Ms Lumley says Arch is a cut above many other market participants.
“Claims is something that I always want to talk about, because of the quality of our team, and it also falls into what brokers are finding important at the moment. Our experienced claims team is an important differentiator for Arch.”
Arch says its appetite is broad and it operates in corporate, commercial and SME market segments, and can consider any size of risk, from global, publicly listed companies to privately owned operators.
“We don’t have an upper revenue cap for companies – we underwrite on a risk-by-risk basis and empower our underwriters to make an informed call.”
While AI has had a negative impact on claims, Arch is deploying technology to enhance its product delivery and service.
Ms Lumley says core to its proposition is “being able to trade where our brokers want to trade”, whether that’s in the open market or via digital channels.
The insurer has its own self-service online quote and bind platform, Coverhub, through which brokers can secure management liability coverage, and Arch is also working to ensure its products are plugged directly into brokers’ platforms.
It is also incorporating AI-based technology into the business to gain efficiencies, but Ms Lumley says the tech is not making “unilateral decisions”.
“It’s a bit like self-driving cars. You start removing your hands from the steering wheel a bit and maybe in time you get more and more comfortable as the technology improves.
“But I think it is a long way from there at this stage. My hands are still on the steering wheel.”
