Physical AI Is Forcing Insurers to Start From Scratch
Physical AI Is Forcing Insurers to Start From Scratch
Publish Date: 2026-06-23 18:54:00
Source Domain: www.pymnts.com
Physical artificial intelligence (AI) doesn’t follow a script. Unlike traditional machines that execute fixed commands, physical AI systems use sensors, software and AI models to decide how to act as conditions change. That flexibility is also what breaks the liability framework traditional policies was built to handle.
When something goes wrong, the fault rarely belongs to one company. A robot maker may have built the hardware. A separate firm may have supplied the AI model. The operator may have set failed to enforce the operating rules. Contracts divide those duties on paper, but a single incident can still trigger disputes over which failure caused the loss.
Existing policies leave gaps on both ends of a robot incident. A standard business insurance policy may not cover the loss at all if it includes an AI exclusion or if the loss doesn’t fit its definition of an accident. If it does respond, it likely covers only physical damage, not the production losses that follow when a robot failure shuts down a line.
Insurers are choosing to exclude AI from their policy coverage. Berkshire Hathaway, Chubb and Travelers sought state regulatory approval to exclude AI-related damages from general liability policies and state regulators approved more than 80% of those requests, PYMNTS reported. Some carriers went further, establishing absolute exclusions across multiple policy lines.
New Robot-Specific Policies Fill Gaps Standard Coverage Misses
Axis Insurance built a program specifically for companies that make and deploy autonomous robots. It covers bodily injury and property damage from AI navigation or perception failures, physical damage caused by a cyberattack that takes over a robot’s controls, and production losses from a software update or sensor failure that takes a robot offline, even when no physical damage has occurred. It also covers cases where a defect in a third-party sensor or component triggers a failure, but the claim lands on the company that…
