Errors as AI connects to devices such as robots and cars can lead to injury, damage and new liability, WTW warns.

When “physical AI” causes harm, responsibility may be shared among the manufacturer, software developer, operator and maintenance provider, complicating liability and insurance.

Examples include robots, autonomous vehicles or equipment, automated warehouse and manufacturing systems, drones and surgical devices.

AI-enabled systems determine and execute their own steps, and behaviour of AI-enabled machines can be difficult to predict, test, supervise and reconstruct after an incident, the broker says, noting machines operate outside of controlled spaces, encountering unprogrammed situations.

A flawed software update or blind spot can cause thousands of units running identical models to fail simultaneously.

“Humanoid robots and autonomous vehicles increasingly operate alongside people under less predictable circumstances. This complicates supervision, maintenance and liability,” WTW chief innovation and acceleration officer John Bremen says.

Software-based AI can create intangible risks such as bias, intellectual property infringement, privacy breaches and incorrect decisions.

Robotics “adds the potential for collisions, fires and operational incidents. Cyber threats take on a physical dimension, as compromised robots may damage property or injure people rather than simply expose or lose data. As adoption grows, the boundaries among cyber, operational and physical risk blur.”

Liability could fall on the manufacturer for a design flaw, the software developer if an algorithm misjudges balance, the operator if training is inadequate, or the maintenance provider if a component fails. The resulting exposure may span general liability, product liability, cyber, workers’ compensation and business interruption coverage.

WTW recommends reviewing policy wording for AI exclusions and confirming how cyber-caused physical damage is treated, and looking at specialist products emerging for autonomous systems.

“Assign clear accountability for physical AI risk: hold a chief operating officer, chief safety officer, chief AI officer or equivalent responsible for areas such as fleet safety monitoring, software update validation, audit trail completeness and incident response.”