AI insurance to remain niche through 2028 despite 80% growth

Exclusions will outpace standalone AI products

AI-specific insurance will grow rapidly over the next six years but remain a small fraction of the commercial property and casualty market, according to projections from ScienceSoft, a McKinney, Texas-based IT consulting and software development firm.

The company forecasts the AI insurance segment will expand from approximately $40 million in 2024 to $4.8 billion by 2032, representing an annual growth rate near 80%. Yet even at that pace, AI-specific coverage would account for only 0.34% of total commercial P&C premiums by 2032.

ScienceSoft expects 60% to 80% of new policies and renewals in errors and omissions, directors and officers, employment practices liability, and cyber insurance will incorporate AI risk into underwriting decisions by 2028. However, most midsize U.S. insurers will address AI exposure through existing policy lines rather than creating standalone AI products, according to the report first published by Insurance Business.

Why it matters

The projection suggests carriers will manage AI risk primarily through exclusions and modified policy language rather than building new product lines—a distinction that matters for brokers advising clients on coverage gaps and for technology vendors positioning AI governance tools. The forecast also comes from a firm that builds underwriting automation systems for insurers, meaning ScienceSoft has a commercial interest in carriers adopting the sophisticated underwriting capabilities needed to assess AI risk across existing policies.

Exclusion filings accelerate across major carriers

The directional trend ScienceSoft describes aligns with documented market activity. The Insurance Services Office published standard generative AI exclusion forms in July 2025. By August 2026, a nationwide review identified 4,078 state filings across 49 states adopting versions of those exclusions, with 2,369 already in force across commercial general liability, umbrella, businessowners, and E&O policies.

Major carriers including W.R. Berkley, Chubb, Travelers, Berkshire Hathaway, and AIG filed to adopt ISO's endorsements or their own AI exclusion language by April 2026, according to Insurance Business reporting.

The exclusion pattern varies by line. AI exclusions appear in roughly 10% of the employment practices liability market despite litigation like Mobley v. Workday raising questions about algorithmic hiring liability. Directors and officers insurers have largely avoided broad AI exclusions so far, though brokers describe such moves as likely in the future.

Incident volume drives underwriting scrutiny

ScienceSoft cites a 262% increase in publicly documented AI incidents from 2022 to 2025 as the demand driver behind carriers' policy adjustments. That figure tracks with data from the AI Incident Database, an independent repository of AI harms also referenced in Stanford's annual AI Index.

A 2026 Gallagher survey found one in five insurance professionals report their insureds have already experienced AI-related losses, while fewer than half of organizations maintain formal AI risk management frameworks—the silent risk dynamic pushing insurers toward explicit policy language.

At least one carrier is moving in the opposite direction. HSB launched an affirmative AI liability product designed to write back coverage other insurers exclude, evidence that a small standalone market is forming even as the broader industry leans on exclusions.

Context on the source

ScienceSoft has built underwriting automation systems, claims processing software, and compliance tools for insurance carriers, brokers, and insurtechs since 2012. The firm reports developing a large-scale automated underwriting system for a global commercial carrier with more than $30 billion in assets. Brokers and risk managers should treat the report's specific market-size projections as one technology vendor's proprietary estimate rather than an independently audited forecast.

The findings were first reported by Insurance Business.