NEXT Insurance experts identify five AI trends reshaping the insurance market in 2026.
As more small businesses adopt and integrate AI into their day to day, the impact on the insurance industry is growing.
To understand what this means for carriers and small business owners, we turned to our NEXT experts across claims, underwriting, AI and product.
Here we dig into some of the biggest risks and where the market is heading.
Agentic AI tools don’t just assist, they act. And these autonomous actions can create real-world harm, liability and loss if left unchecked.
Tim McDermott, NEXT’s VP of Insurance Products, sees this as a major blind spot that’s leading to a new class of “blended” claims — claims that involve more than one policy type.
“Employees using AI tools — especially agentic AI — without proper governance will lead to incorrect client deliverables, privacy breaches and even IP leakage,” McDermott says. “That lack of oversight will drive more professional liability and cyber events, and in many cases, losses that are harder for businesses to prepare for.”
Whether generating content or automating administrative tasks, if the output is unchecked, the liability chain can become murky.
Julie Roseland, NEXT’s Director of Commercial Claims Liability, captures the content-risk angle. “When AI tools produce materials that are not fully reviewed, the risk of defamation, copyright infringement, false advertising or other misrepresentations increases.”
What this means for carriers
Coverage definitions, underwriting guidelines and policy forms will need updating to clarify how AI-driven errors are categorized and which line responds first. Carriers that can clearly articulate this boundary will earn trust as AI reshapes professional exposure.
What this means for small businesses
Understand your policies and make sure you have the coverage you need, potentially professional liability plus cyber liability. And put controls into place to govern how your business uses AI.
AI isn’t just changing what needs to be insured; it’s changing how people buy insurance.
McDermott sees a fundamental shift underway. “With the help of LLMs, document understanding, image analysis and third-party data integrations, underwriting will continue to shift. Instead of users having to manually fill in forms, I think we’ll see insurers taking on that administrative task by pre-filling information that users just need to verify,” he says. “I also expect more of the critical underwriting data to be gathered through conversational AI, making the process faster, with more accurate decisions.”
This could significantly reduce friction for small business owners who often abandon applications because they don’t have exact answers to underwriting questions. But it also requires carriers to justify where that data comes from and why it’s reliable.
This is where infrastructure matters.
“Companies built on modern tech stacks, where data and IT vendors can be standardized, will benefit the most and adopt these technologies earlier,” says Effi Fuks Leichtag, Chief Product Officer at NEXT.
Digital-first insurers can leverage model orchestration, automated decisioning and unified data pipelines to deliver faster, more accurate underwriting.
What this means for carriers
Underwriting will look less like exhaustive data collection and more like intelligent verification. Carriers that operationalize this shift earliest will set the standard.
What this means for small businesses
It should become faster and easier to find the right coverage.
Claims teams are facing two significant changes:
Automation is reducing the administrative burden of claims. “AI will create a much faster and more accurate first-notice-of-loss process, where key details help route a claim to the right adjuster immediately,” Roseland says.
Automated triage, enhanced fraud analytics and video-based evidence capture can all help to reduce cycle times.
Losses are becoming more complicated. Causation is becoming less straightforward and more nuanced due to a combination of AI-assisted negligence, cyber triggers and unclear privacy statutes.
“We’ll increasingly have to sort out whether an issue stems from a true professional error or from a technology failure — things like AI-generated inaccuracies or data privacy missteps,” Roseland says.
What this means for carriers
Adjusters will spend less time gathering documents and more time exercising judgment, assessing digital evidence, interpreting cross-line exposures and negotiating resolutions.
What this means for small businesses
You can expect shorter timelines for claims resolution. But the onus will still be on you to follow your carrier’s procedure for filing claims quickly.
Concerns around data sourcing, explainability and bias are already prompting state-level action. All 50 states have introduced bills related to AI regulation or data/algorithm oversight, according to the National Conference of State Legislatures (NCSL). 2026 is poised to accelerate that trend.
“The biggest external pressures on the small business insurance market will come from tightening AI governance and expanding state privacy laws,” McDermott says. “Regulators will push for clearer disclosures around the data sources used in underwriting.”
This means carriers may need to show:
These expectations extend to both underwriting and claims, creating pressure on documentation and auditability.
Fuks-Leichtag expands on the regulator perspective. “AI is raising real concerns for regulators. Ensuring that AI is not introducing bias or discrimination in coverage decisions is an ongoing and important discussion.”
What this means for carriers
To build trust with customers and regulators, treat transparency as a trust-building opportunity, and not just a compliance issue.
What this means for small businesses
When choosing a carrier, pay attention to disclosures. A carrier that can clearly explain how it evaluates risk and why it makes certain decisions may be more likely to offer fair pricing, fast claims resolutions and fewer surprises come renewal time.
AI won’t eliminate insurance agents. But it will change how agents spend their time and what customers can expect.
Administrative tasks like gathering documents, answering basic coverage questions and updating COIs will increasingly become automated – leaving agents with a, “greater capacity to help clients understand coverage gaps, tailor their policies and navigate leases, vendor contracts and COI requirements,” McDermott says.
Jack Ramsey, VP of Agent Channel at NEXT, highlights the time pressure driving this evolution. “Agents have the knowledge to help clients identify gaps and make smarter coverage decisions, but time constraints get in the way,” he says. “AI can take paperwork off an agent’s plate so they have more time to guide clients toward the right coverages.”
Fuks-Leichtag explains what it could look like when agents are more consultants than order-takers. “Small business insurance is more complex and demanding than personal lines, but AI helps bridge the gap between what business owners need and the fear many have around acquiring coverage.”
What this means for carriers
Agents who embrace AI-assisted workflows will be positioned as high-value advisors. Agents who resist may struggle to compete with faster, more responsive peers.
What this means for small businesses
Take advantage of the shift. Agents will have more time to advise, not just quote. Bring them your contracts, plans and “what if” questions so they can help you spot exposures before they become claims.
These insights from our NEXT insurance experts point to a clear conclusion: AI is driving change in how underwriting is done, how claims are processed, how agents work and how small businesses get the coverage they need.
“We are already seeing a big lift in customer satisfaction when AI is used to help explain policies and coverage or answer detailed questions,” Fuks-Leichtag says. “We’re seeing this progress scale in claims and service, too.”
For carriers and agents, the coming year will be defined by modernizing tech stacks and building hybrid systems that blend AI with the human touch. Their efforts could result in a competitive advantage and better service to small businesses.
NEXT is dedicated to providing small businesses with the tailored business insurance they need to help protect against a broad range of risks.
If you’re a small business owner, get an instant quote to see how NEXT can help protect your business. If you’re an agent, become an appointed NEXT agent.
Matt Crawford has spent nearly 10 years as a small business insurance specialist, helping small business owners better understand and navigate insurance. His work has been published in the LA Times, AP, SF Chronicle and SF Standard.
At NEXT, his goal is to make insurance more accessible for entrepreneurs and to celebrate small business success stories.
