Trade secret disputes are growing into a significant line for the intellectual property insurance market as companies embed artificial intelligence across their operations, insurers told MLex. The expansion of AI is creating new exposures around confidential data, employee mobility, and ownership of proprietary technology, pushing more businesses to seek coverage.
AI expands trade secret exposure
Companies using AI tools often train models on internal data, collaborate with third-party developers, or allow employees to access sensitive algorithms. Each of these activities can blur the lines of trade secret protection. Insurers say that the risk of misappropriation claims rises when workers move between competitors, taking knowledge of AI systems with them. Disputes over who owns AI-generated output or the underlying training data add another layer of uncertainty.
The insurance industry is seeing this shift directly in underwriting inquiries. More policyholders are asking whether their existing IP coverage addresses trade secret theft tied to AI, and many are finding gaps. Trade secret insurance policies, once a niche product, are now being requested by companies outside the technology sector as AI adoption spreads into manufacturing, financial services, and healthcare.
Insurance market responds
Carriers are developing new endorsements and standalone products to cover investigation costs, legal defense, and damages from trade secret litigation. Some are also offering risk assessment services to help policyholders inventory their trade secrets and tighten internal controls. Insurers told MLex that demand for AI for Insurance products is accelerating, particularly from mid-sized firms that lack large in-house legal teams.
Underwriters are paying closer attention to how applicants manage employee access to AI systems and how they document proprietary data. The quality of a company's trade secret hygiene-such as confidentiality agreements, access logs, and data classification-is becoming a key factor in pricing and coverage terms. One insurer noted that many businesses still treat trade secrets as an afterthought, which leads to higher premiums or exclusions.
Legal risks driving demand
The legal landscape around AI and trade secrets remains unsettled. Courts are grappling with questions about whether AI training on public data can infringe trade secrets, and how to define reasonable efforts to protect secrecy when data flows through multiple cloud environments. These uncertainties make litigation more likely and outcomes harder to predict, which feeds demand for insurance. AI for Legal risks, including regulatory scrutiny over data usage, compound the exposure for companies operating across borders.
Employee mobility is a particular flashpoint. When a data scientist leaves for a competitor, the original employer may allege that trade secrets embedded in AI models walked out the door. Defending against such claims is expensive, even if the allegations are unfounded. Insurance that covers defense costs can make the difference for a company deciding whether to fight or settle.
Why this matters for insurance professionals
For brokers and underwriters, the rise of AI-driven trade secret risk means clients who never considered this coverage now need it. The opportunity lies in educating commercial policyholders about the gaps in standard IP or cyber policies, which often exclude trade secret claims or limit coverage to patent and copyright disputes. Underwriters who build expertise in evaluating AI-related trade secret controls can differentiate their offerings in a market that is set to grow as fast as AI adoption itself.
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