Traditional insurance coverage remains elusive for companies developing frontier technology systems
A hardware partner reported difficulty obtaining coverage for a pilot program last week. Traditional brokers refused to underwrite the project despite the advanced nature of the autonomous systems involved. One denial stemmed from the use of CAD software, highlighting the unreasonable nature of current insurance industry policies.
Limitations within insurance for AI-era risks
Insurance firms are not structured for the current technological environment. Most providers rely on standard forms from ISO, applying minor modifications to manage risk. New clauses released by ISO in January effectively exclude coverage for any losses connected to AI integration.
Ambiguity in current AI policy language
These policy clauses lack necessary precision. Current generative AI definitions target systems creating text, images, or code, leaving gaps for other technologies. Underwriters offer inconsistent guidance regarding robot-control models that generate motor commands, which hinders teams attempting to deploy LLM agents or physical robotics.
Risklytics solutions for underwriting challenges
Risklytics, a YC S26 startup, focuses on overcoming these deployment obstacles. The company creates specialized workflows for businesses developing drones, satellites, and autonomous systems.
- Structured Application: Instead of using generic forms meant for law firms or bakeries, the company employs a six-step process to define the actual technology. This method produces structured data for insurers, removing the extraneous information that usually causes rejections.
- The AI Clause Map: The platform monitors which insurers include AI-voiding clauses and which providers remain open to frontier technology.
- Transparency on Denials: When coverage is denied, the team identifies the specific rationale and outlines necessary modifications for potential approval.
Risklytics commission model
The company manages the complexities of insurance underwriting by collecting commissions from the insurer rather than charging brokerage fees. When companies transition from R&D to real-world pilots, such as robotics rental services or bridge-collision systems, underwriters frequently default to rejection. Precise framing of the technology is essential for coverage. Specialized AI workflows for risk and compliance will become a requirement for autonomous systems to reach the market. https://www.risklytics.com/
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Frustrated with carriers—especially when they can’t even handle basic tech workflows. For example, one hardware partner was denied coverage just because their team uses CAD software in development, despite the actual risk being minimal. Meanwhile, insurers still rely on outdated ISO forms with vague AI clauses that void coverage for anything even remotely related to AI—even if it’s just a robot generating motor commands.
The real issue is that most brokers don’t understand the nuances of modern risk. You need someone who can navigate these ISO loopholes and actually assess the real exposure, not just slap on a blanket rejection. Anyone else dealing with similar roadblocks?
Absolute nightmare. Did you have to use boutique firms to find any coverage? One partner I spoke with ended up working directly with Risklytics—a startup specializing in AI-specific underwriting—to structure their pilot program’s coverage, since traditional brokers kept rejecting them over vague ISO clauses. The whole process feels like navigating a minefield where the rules keep shifting.
Pure chaos. Which specific legal bottlenecks are killing your early-stage pilots right now? I was talking to one of our hardware partners last week who was losing sleep because they couldn't get coverage for a pilot program. They're building some incredible autonomous systems, but every traditional broker they spoke to just hit them with a flat "no." It wasn't even because the tech was too risky; one guy was literally denied because his team uses CAD software in their workflow. It sounds ridiculous, but that is the current state of the industry.
One concrete example of this issue is that insurance companies are using outdated clauses from the Insurance Services Office (ISO) that basically void coverage for any losses arising from AI used anywhere in a process, as released in January.