Is AI Insurance Mandatory? Precedents and the Global Legal Crisis

If an autonomous delivery drone spirals out of control and injures a pedestrian, who will pay the hospital bills? When an algorithmic stock market bot managing a multi-million-dollar portfolio experiences an "AI hallucination" and suddenly bankrupts the funds, how will the loss be compensated? Massive risks like these have ignited a brand-new legal debate worldwide: Should Artificial Intelligence Financial Liability Insurance be mandatory?

In this massive article, we delve deeply into the problem of compensating damages caused by autonomous systems; examining the legal systems of the European Union (EU), South Korea (KR), and Turkey (TR)—three critical axes experiencing the highest intensity of technological automation—in the context of "Background," "Regional Regulations," "Implications," and "Conclusions."

1. Background: The Evolution of Liability Law and the "Black Box"

In traditional tort law, as a rule, "Fault-based Liability" is required for someone to pay for damages. However, modern AI systems (especially Deep Learning models) operate with a "Black Box" logic that establishes its own rules. Even the engineer who coded the system cannot fully explain why the machine preferred data in the 45th layer over another.

1.1. The Collapse of the Burden of Proof

If a pedestrian is crushed by an autonomous vehicle, according to classical law, the pedestrian must prove that "the software developer made a coding error" or "the manufacturer installed the sensors incorrectly." It is mathematically impossible for an average citizen to prove technical flaws in the closed-source algorithms of billion-dollar tech giants in court. This situation means tech giants would never pay compensation, leaving all the damage on the shoulders of the victimized citizen.

1.2. The Solution: "Strict Liability" and an Insurance Pool

Historically, the law invented the concept of "Strict (Hazard) Liability" to overcome this impossibility of proof. Operators of nuclear power plants or transporters of explosives are held liable for damages even if they are not at fault. Today, legal scholars argue that high-risk AI should be placed exactly in this "hazardous activity" category, and a Mandatory AI Insurance pool should be established, much like Mandatory Traffic Insurance.

2. Global Axis Analysis: European Union, South Korea, and Turkey

In light of this philosophical background, let's look at how the world's leading technology and legal authorities approach this problem.

2.1. European Union (EU): The AI Liability Directive (AILD)

The European Union has not only enacted the world's most comprehensive Artificial Intelligence Act (EU AI Act) but also prepared drafts for the Artificial Intelligence Liability Directive (AILD) and the updated Product Liability Directive (PLD) to compensate for damages.

• Easing the Burden of Proof: Acknowledging that it is impossible for victims to read code, the EU grants courts the authority to apply a "presumption of causality." If the AI is high-risk and a damage has occurred, the court proceeds with the presumption that "The damage originated from the AI." The burden of proving otherwise falls on the AI company (provider).
• Insurance Status: In current texts, a blanket "Mandatory Insurance" requirement has not yet been strictly legislated. However, it is becoming de facto mandatory for companies releasing high-risk AI (e.g., autonomous robots, medical AI) to obtain commercial insurance due to massive fines and compensation risks. Left and green groups in the European Parliament are intensively pushing to legislate a direct mandatory financial security (fund/insurance) mechanism, especially for automotive and healthcare AI.

2.2. South Korea (KR): Robotic Insurance and Proactive Tech Law

South Korea is one of the most highly automated countries in the world, particularly in manufacturing robots, service bots, and medical AI. Contrary to the EU's "rule-maker" approach, the Korean approach focuses on producing sectoral and specific solutions to avoid stifling innovation.

2.3. Turkey (TR): The Current Vacuum and the Potential of the Code of Obligations

Currently, there is no specific law directly bearing the name "Artificial Intelligence" or "Autonomous Systems" in Turkey. In cases of damage, the Turkish Code of Obligations (TBK) No. 6098 comes into play. However, the traditional rules of the TBK are insufficient to resolve sophisticated damages generated by algorithms (for instance, compensating a company that unjustly lost a multi-million lira tender due to algorithmic discrimination).

The strongest argument currently available in Turkey is "Strict (Hazard) Liability" regulated under TBK Article 71. If an activity has the inherent potential to cause severe damage to the environment (explosives factory, hazardous material transport), the operator is held strictly liable. Just as Medical Malpractice or Highway Traffic Insurance is mandatory in Turkey, legal scholars strongly recommend making "Autonomous Decision Support Systems Financial Liability Insurance" mandatory under the upcoming Turkey AI Action Plan / AI Act. Otherwise, foreign AI giants operating in the Turkish market will escape any compensation related to the damages they cause (by stating "you agreed to the user terms").

3. Implications: InsurTech and Risks for Corporations

If states mandate "Mandatory Insurance" for high-risk AI systems, this will have seismic impacts on the tech and financial worlds:

1. Actuarial Crisis (Impossibility of Premium Calculation): An insurance company has 100 years of accident data to issue a traffic insurance premium. But no one knows when a self-coding AI will make a mistake. How will the insurance premium of an un-transparent "Black Box" algorithm be calculated? This could cause insurance companies to demand massive risk premiums, sending AI costs skyrocketing.
2. Stifling of Innovation: Giant corporations (like Samsung, Hyundai), as seen in South Korea, can easily pay high insurance premiums for their autonomous robots. However, if a brilliant AI start-up founded by 3 fresh university graduates is forced to pay millions of liras in "mandatory financial liability insurance" to launch its product, it means innovation will remain solely in the hands of global monopolies.
3. The Rise of InsurTech: To solve this exact problem, the "InsurTech" (Insurance Technologies) revolution—measuring the risks of algorithms using AI itself to issue policies—will accelerate. New generation auditing companies will be born, testing the code of an AI company with millions of scenarios in a virtual lab (Red-Teaming) before issuing an insurance policy.

4. Conclusions: What Awaits Us in the Future?

When automobiles were first invented, they were judged by horse carriage laws. That was until fatal accidents increased, and the concept of "Mandatory Traffic Insurance" entered human life. Today, the painful process we are experiencing for AI is exactly this. Both the theoretical laws of the European Union and the practical field applications of South Korea show that AI insurance will inevitably become MANDATORY for high-risk areas.

What Turkey must do is not import this technology and place the risks squarely on the shoulders of local citizens. The legal infrastructure to be prepared must ensure citizen safety by creating a centralized "AI Damage Compensation Pool"—similar to Medical Malpractice or Traffic insurance—but simultaneously build a smart model that subsidizes premiums to a level that does not suffocate entrepreneurs.