The global insurtech sector experienced shifts in investment patterns throughout 2024, with artificial intelligence (AI) playing an increasingly central role in funding trends, according to Gallagher Re’s latest quarterly report.
While early 2024 saw steady investment levels, the latter half of the year presented fluctuations, with a notable decrease in funding during the fourth quarter.
Gallagher Re reported that insurtech funding totaled US$4.25 billion in 2024, a 5.6% decline from the US$4.51 billion recorded in 2023, marking the lowest annual total since 2018. The number of deals also fell by 18.5% year-over-year, from 422 in 2023 to 344 in 2024, the lowest level since 2019.
It is worth noting that in the previous quarter, investment in the sector reached US$1.38 billion, marking the highest funding level since Q1 2023. Of the total investment, 55.5% went to mega-rounds valued at US$100 million or more.
Despite the decline, early-stage funding increased by 8.8%, while the average deal size grew by 14.6%, indicating a shift toward more targeted investments.
The fourth quarter saw a sharp drop in funding, falling from the US$1.38 billion in Q3 to US$688.24 million in Q4. This represented a significant quarter-over-quarter decline despite a slight increase in the number of deals, from 77 to 78. AI-focused insurtechs accounted for 42.3% of Q4 deals, with half of all transactions involving companies specializing in claims-related technology.
Additionally, 45 venture investments in technology firms were made by re/insurance companies in the quarter, further demonstrating the industry’s commitment to digital transformation.
Gallagher Re’s analysis of 2024 investment trends highlights the growing role of AI within the insurtech sector. The firm notes that AI-enabled insurtechs raised an additional US$5 million on average compared to non-AI companies. In Q3, 63.4% of insurtech firms that secured funding had an AI focus. However, the report cautions that while AI remains a strong driver of investment, its actual impact on efficiency and productivity across the insurance industry remains in development.
AI continues to be a focal point of discussion, with some viewing it as a necessary tool for enhancing underwriting and risk selection. Gallagher Re emphasized that AI applications must align with commercial objectives, noting that while AI can improve risk assessment, its implementation must be strategic.
The report also warned against overuse of AI in customer service settings, suggesting that while automation has potential, it should not come at the expense of customer experience.
Despite the decline in overall funding, insurer and reinsurer corporate venture capital (CVC) funds remained active in 2024. Gallagher Re reported that in October alone, nearly US$340 million was invested by industry CVCs, with notable contributions from MS&AD, Munich Re, American Family, and Tokio Marine.
Much of this investment was directed toward insurtechs focused on claims, cyber, property, and specialty insurance lines.
The report underscored that 2024 was a year of transition for insurtech, moving toward a more sustainable growth model. Gallagher Re pointed out that after years of rapid expansion, the industry has shifted its focus toward profitability over scale.
As mega-round funding has decreased and fewer billion-dollar startups, or “unicorns,” have emerged, there has also been a reduction in over-hiring and rushed business decisions, signaling a maturation of the sector.
Looking ahead, Gallagher Re anticipates continued interest in AI applications within insurtech, particularly in underwriting, claims processing, and cyber risk management. While the investment landscape may remain cautious, the report suggested that a more disciplined approach to funding could lead to a stronger and more stable insurtech market in the years to come.
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