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Aipedia: Insurance brokers
A broker's chatbot speaks for the firm, so a wrong answer about cover is the broker's misstatement, not the software's. The FCA has flagged inflexible automated journeys as a Consumer Duty concern.
Part of: AI in insurance brokers
In short
Brokers use chatbots to answer cover questions, take mid-term adjustments, issue documents and handle simple complaints. A generative AI chatbot can give a confident and wrong answer about what a policy covers, or process a change without spotting that it affects cover. Under ICOBS 2.2.2R communications must be clear, fair and not misleading, and for retail customers the Consumer Duty expects support that does not create barriers. The FCA's October 2026 page lists inflexible automated journeys as an area for improvement. Misstatement claims against brokers would usually fall within E&O cover, subject to the wording.
Chatbots answer the questions brokers hear every day: am I covered for this, how do I add a driver, when does my policy renew, where are my documents. Newer generative AI chatbots can read the client's policy and answer in natural language, and some can process mid-term adjustments such as a change of address, vehicle or sum insured without a member of staff.
The attraction is round-the-clock service. The risk is that the chatbot sounds like an expert while having no real understanding of the wording or of the client's circumstances.
Commercial clients use chatbots too, often for certificates, documents and simple endorsements. A small business owner may treat a quick chatbot answer as advice from the broker, especially where the firm's website presents the chatbot as part of its advice service.
The FCA October 2026 page includes chatbot case studies: one firm gave clear explainers about what its tool could and could not do and pointed consumers to other help, such as free debt advice, where it could not help; another worked with frontline staff to identify vulnerability indicators the chatbot should flag. "Creating inflexible automated journeys" is listed as an area for improvement.
Illustrative: a retail customer asks a broker's chatbot whether her home policy covers accidental damage to a laptop she takes to work. The chatbot reads the general accidental damage section and replies "yes". It misses that portable items away from the home are only covered if a specific add-on was bought, which she did not buy. The laptop is damaged at work, the claim is declined, and she complains that the broker told her she was covered.
Other risks include a chatbot accepting a change of vehicle without asking about modifications, and a customer in difficulty who cannot find a way to speak to someone.
A misstatement of cover is a classic broker E&O allegation, and it makes little difference whether a person or a chatbot gave the answer. Broker PI meeting MIPRU 3.2.4R must include cover for Ombudsman awards, which matters because most chatbot users are consumers or small businesses eligible to complain to the Financial Ombudsman Service. The Ombudsman has asked the FCA for clarity on records, human escalation and disputes involving AI agents and chatbots, so expect scrutiny of chatbot logs.
See also AI in claims notification, AI-written marketing, the four Consumer Duty outcomes and the insurance broking AI hub.
Apex arranges PI for insurance brokers. A broker can check whether your policy responds to misstatements made through automated channels and how insurers view chatbot use at renewal.
A chatbot cannot change the insurance policy, but its answers are the broker's communications. If a customer relies on a wrong answer and suffers a loss, the customer may have a complaint or claim against the broker for misstatement.
The FCA's October 2026 page shows good practice such as clear explanations of what a chatbot can and cannot do, signposting to other help and identifying vulnerability indicators. It lists inflexible automated journeys as an area for improvement.
It can, but any change that affects the risk, such as a new vehicle, occupation or property use, should trigger the right questions and ideally human review. Otherwise the policy may no longer fit the customer's demands and needs.
SYSC 9.1.1R requires orderly records, and chat logs are often the best evidence of what a customer was told. Keeping them, and being able to retrieve them for a complaint, is sensible practice.
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Start a PI quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.
