InsurTech funding slumps despite AI demand
Global funding for InsurTech startups slumped in the second quarter of the year despite demand for AI as companies looked to the tech to help drive efficiencies and process claims.
According to the second-quarter 2025 Global InsurTech Report, a collaboration between Gallagher Re and CB Insights, global InsurTech funding declined by 16.7 per cent quarter-on-quarter to $1.1bn (£750m).
Funding for property and casualty (P&C) InsureTechs dropped to the lowest level since the first quarter of 2018.
P&C funding fell 68 per cent quarter-on-quarter to $363m. However, life and health (L&H) InsurTech funding nearly tripled quarter-on-quarter, to $729m.
Despite the drop, total InsurTech funding has surpassed the $60bn mark since records began in 2012.
Of this total, approximately $12.9bn (about 21.5 per cent) has been invested in property-related InsurTech companies.
AI-centred InsurTechs continued to draw the majority of funding for the quarter. AI-centred InsurTechs raised $583m across 52 deals. The average deal size for AI-centred companies was $11.7m, slightly below the average deal size for the entire sector.
24 of the 52 AI-centred deals went to early-stage companies, including AI assistants like Further AI and Gall.
Since 2012, about $15bn (25 per cent) of the $60bn in total InsurTech funding has gone to AI-related technologies, but allocations have accelerated in recent years.
However, the report notes that since 2013, a total of $1.6 trillion globally has been invested in AI firms and tools, highlighting where the capital is flowing.
InsurTech deals
Equal Parts, a company that acquires insurance agencies, raised $10m in April, with support from investors like Equal Ventures and Max Ventures. The company’s business model centres on providing technology to enhance cross-selling, up-selling, and customer acquisition.
Also in April 2025, Vantel raised $2m from investors including Ave Ericson, Inception Fund, and Y Combinator to assist commercial insurance brokers with policy analysis, contract review, and compliance validation.
Another fintech startup, Dorothy, raised an undisclosed amount on the same day, focusing on connecting policyholders with public adjusters for insurance payouts and offering property inspection services.
Further AI, which provides AI-powered assistants for commercial insurance, secured a $0.3m round with investments from BrokerTech Ventures, Converge, and Nexus Venture Partners.
Marshmallow raised $45m ofrom investors such as BlackRock and Hedosophia, to provide car insurance tailored for newcomers to the UK while Steadily raised $50m with backing from investors like Clocktower Technology Ventures and Matrix Partners for its specialized landlord insurance products.
Finally, Gravie, a provider of health plans for small and medium-sized employers, closed a massive $144m round in June, with support from Aberdare Ventures and FirstMark Capital, among others.
AI tools drive the growth of parametric insurance
Gallagher Re and CB Insights note that AI tools have been key to the growth of the parametric InsurTech market over the past few years.
Parametric policies offer pre-agreed payouts based on objective triggers such as wind speed, earthquake magnitude, or rainfall thresholds.
The report suggests that AI-improved risk modelling has the potential to streamline catastrophe bond transactions.
AI can also help parametric insurance reach previously underserved markets, such as in Africa, Southeast Asia, and Latin America, where a lack of observational data has been a challenge.
The report notes: “AI can improve parametric product design in several ways. First, it can refine the selection of optimal triggers by enhancing the analysis of historical event data against actual losses beyond traditional actuarial methods, thereby minimising basis risk.
“Second, AI facilitates the integration of new data sources – drones, ground sensors, even crowdsourced social media data – to validate events in near real-time.
“A compelling example is the use of AI to remotely detect post-disaster damage. The rapid processing of satellite and aerial images can help insurers assess the extent of building damage after a hurricane or earthquake, triggering automatic payout mechanisms within hours.”
Notable deals in this AI-driven market include Adaptive Insurance, a climate resiliency company that uses AI and data to redefine climate-based parametric insurance, which has partnered with Tokio Marine HCC to offer its flagship product.
Gallagher Re has also placed a sovereign parametric flood product with SEADRIF in Southeast Asia, which triggers based on loss estimates reported by the local emergency response agency.
Meanwhile, Descartes, a global underwriter specialising in parametric products, headquartered in Paris, uses a scientific approach to insure climate risks and has raised over $141m. It deploys AI in its risk analysis and underwriting processes to price policies, consider climate conditions, and ensure claims payments match actual losses.