Insurers turn to generative AI for catastrophe modeling, but hallucinations and sales logic could get in the way

Insurance companies are beginning to use generative AI to simulate extreme weather patterns and estimate potential financial losses where historical data is limited. While these models can create vast amounts of synthetic climate scenarios to refine risk assessments, experts caution that the technology is prone to errors known as hallucinations. If these systems produce inaccurate data or prioritize sales incentives over scientific accuracy, they could lead to significant miscalculations in policy pricing and industry-wide financial exposure.