So your small software vendors would have to demonstrate that they had proper processes in place to obtain the insurance at a sensible price. Just like hardware manufacturers, and for that matter plumbers and jobbing electricians, have to do now.
I work for a TickIT+ certified developer so we do follow those "proper processes" and we do have to demonstrate that we follow them. We also guarantee our software up to its full value. If it breaks you get your money back.
It is, precisely, because we do follow rigorous procedures that we understand that they cannot ensure an absolute, 100%, fault free product (show me a product that has never failed). A contract with even a tiny chance of being taken to the cleaners for £millions isn't worth it.
Oh, and "hardware" manufacturers certainly do limit their liability. If your handbrake fails on your new car, they may pay for the damage to your vehicle, but not for any 3rd party damage. And one manufacturer who likes to claim a "lifetime" warranty on their vehicles specifically includes an addition to their manual that you should leave the vehicle in gear when you park it (against highway code advice) because they know a certain model is prone to handbrake failure. A friend recently had his new car roll away, smash 3 parked cars and demolish a lamp post. When he tried to claim off the warranty they pointed at the clause in the manual and, effectively, told him to fuck off.