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Insurtech: the multi-billion-dollar trend in Insurance
As AI and machine learning fuel massive growth, InsurTech is shaking up traditional insurance—here’s why it matters.
In this article
Insurtech companies are transforming the traditional insurance landscape by harnessing advanced technologies like Generative AI, machine learning, IoT, and blockchain. These innovations streamline critical processes such as underwriting, claims management, and customer service, while also enhancing risk assessment and the personalization of insurance policies.
By leveraging these tools, Insurtech companies are not only improving operational efficiencies but also addressing the growing demand for faster, more tailored services from digitally savvy consumers.
In 2022, the global Insurtech market was valued at approximately $11.08 billion. However, the future holds tremendous growth potential. Consensus projections estimate the market will skyrocket to $353.5 billion by 2033, reflecting a compound annual growth rate (CAGR) of 36%.
This explosive expansion underscores the increasing reliance on technology by insurers, as they seek to reduce costs, streamline operations, and adapt to the shifting needs of a digital-first clientele. As the industry continues to evolve, Insurtech companies are poised to play a pivotal role in reshaping the insurance value chain and driving its next phase of growth.
Funding and Deals Trends
Deals by stage
Early-stage deals continue to dominate the Insurtech landscape, accounting for 62% of all deals in 2023, though this represents a noticeable drop from 70% in 2022. This shift can likely be attributed to the growing maturity of the market, with companies increasing in size and advancing beyond their early stages. As a result, mid-stage deals have risen from 15% to 19% over the same period. Late-stage deals, meanwhile, have remained relatively stable over the past four years, making up 10% in 2019 and 9% in 2023. This stability in late-stage deals suggests that while the market is maturing, significant opportunities still exist for growth and expansion in earlier funding stages, where new players continue to emerge and attract investment.
US funding & deals
The folowing graph shows quarterly trends in U.S. Insurtech funding and deal activity from Q1 2019 to Q4 2023. Funding saw a major peak in Q2 2021, surpassing $3.5 billion, driven by investor enthusiasm for digital transformation in insurance. A second peak occurred in Q4 2021, coinciding with 80 deals closed. However, after this period of strong growth, funding levels dropped sharply throughout 2022 and 2023, falling to around $1.1 billion by Q4 2023.
Deal activity mirrored these funding trends. The highest number of deals was 101 in Q2 2021, before declining steadily, with only 48 deals by Q4 2023. The consistent reduction in both funding and deal volume after 2021 suggests a shift in investor behavior, likely reflecting tighter capital markets, economic uncertainty, and a more selective approach to Insurtech investment. Despite this slowdown, the graph shows how 2021 was a standout year, representing a key moment for the sector’s growth trajectory.
Quarterly exits by region
In the U.S., the Insurtech market consistently dominated funding, peaking at 83% in Q4 2019 and remaining robust through 2021, with 71% in both Q1 and Q3 2021. However, the share of U.S.-based funding gradually declined after 2021, dropping to a low of 29% by Q4 2023, signaling a shift in investment priorities and possibly reflecting a slowdown in U.S. market expansion.
Europe showed more stability but with a reverse trend. European funding was relatively lower in 2019, but steadily increased, reaching 57% in Q4 2022 before declining again to 36% by Q4 2023. Asia’s presence in global Insurtech funding, although minor compared to the U.S. and Europe, saw sporadic increases, with peaks of 27% in Q1 2020 and 21% in Q4 2023. Other regions remained relatively flat, never exceeding 21% and typically contributing marginal amounts.
Funding rounds by company
The Insurtech is increasingly attracting capital investment due to its significant potential. In 2023, the largest funding rounds in Insurtech companies like Wefox, ManyPets, and Root Insurance secured significant capital, with Wefox leading the charge by raising the highest and second highest round with a staggering $650 million and $400 million, respectively, marking a crucial year for the company and the industry in general.
Below you can see the largest 2023 funding rounds in the industry in $USD million.
The substantial funding raised by these leading Insurtech companies in 2023 highlights the growing appetite for disruptive solutions within the insurance industry and the urge to modernize the traditional insurance landscape.
With major players like Wefox and ManyPets receiving hundreds of millions in capital, it's clear that investors are betting on the continued expansion of insurance through technology. As these companies scale and innovate, the Insurtech space is poised for rapid growth, shaping the future of insurance for both businesses and consumers.
Insurtech Unicorns valuation and number of companies:
Some of the companies previously mentioned are also among the most prominent Insurtech unicorns, boasting impressive entry valuations in 2023. Wefox ranks third at $4.5B on the list, trailing only behind Coalition at $5B and Devoted Health at $12.6B, the latter of which leads the Insurtech unicorn landscape with a significant margin in valuation. This highlights Devoted Health's dominant position and investor confidence in its innovative approach to health insurance.
Notably, ManyPets and Next Insurance also appear across both funding and valuation rankings, reflecting their strong market position and potential for continued growth. These companies' inclusion in multiple rankings underscores their status as key players driving the Insurtech sector forward, attracting large-scale investments and setting new standards for innovation and market disruption.
Nevertheless, even though the total number of Insurtech unicorns worldwide has steadily increased since 2019, but growth has noticeably stopped since Q3 2022, with the number holding steady at 40 throughout 2023. This leveling off is surprising when compared to the rapid growth seen in earlier years, particularly during the 2019-2021 boom.
For instance, the number of Insurtech unicorns surged from 18 in Q1 2021 to 33 by Q1 2022, marking an explosive phase of value creation and market excitement. The current stagnation could be attributed to a combination of factors, including heightened market volatility, a more cautious investment climate, and the potential saturation of early-stage companies reaching unicorn status. Nonetheless, the existing unicorns continue to drive innovation, and this pause may signal a market recalibration before the next wave of growth.
Insurers investment in Insurtech
Investments into the Insurtech sector have remained consistently robust over the years, highlighting the growing confidence of traditional insurers in technology-driven solutions. In 2018, approximately 85% of insurance-related investments made by insurers were directed towards Insurtech companies, underscoring their commitment to innovation and digital transformation. While there has been a slight decrease over time, with 83% of investments in 2023 going towards Insurtech, this data demonstrates that the Insurtech space continues to dominate the insurers investment landscape.
The ongoing interest from insurers in Insurtech reflects the industry's increasing reliance on technology to enhance operational efficiency, improve customer experiences, and develop more agile and scalable business models.
This trend also suggests that insurers are prioritizing tech-driven strategies to remain competitive and address evolving market demands, while non-Insurtech investments, although important, remain secondary in their overall investment portfolios.
Main insurer’s investments
Allianz emerged as the most active insurer in deal-making, completing 101 deals, with 34% of those investments directed towards Insurtech companies. This reflects Allianz's significant commitment to diversifying its investment portfolio by embracing technology-driven solutions, though traditional investments still make up the majority.
Following Allianz, Munich Re stands out with 72 deals, with nearly half (47%) of its investments funneled into Insurtech. Munich Re's strong presence in the Insurtech space indicates a focused strategy on leveraging new technologies to stay competitive in an evolving market.
Among insurers with the highest proportion of Insurtech deals, Beazley leads the pack with 100% of its four deals focused on Insurtech, demonstrating the company’s clear prioritization of digital innovation. Chubb also stands out with 67% of its investments targeting Insurtech, while MS&AD follows with 50%.
This indicates that some insurers are more aggressively focusing their investment strategies on technology, recognizing the potential for growth and operational efficiency within the Insurtech landscape. These trends highlight the growing reliance on technology by leading insurance firms, as they seek to innovate and adapt to a fast-changing industry.
Analysis of Suitability for Insurtech Development:
The analysis of suitability for Insurtech development highlights the readiness of various countries based on their digital competitiveness and role of insurance and financial services in their export economies. The primary indicators considered in this evaluation are digital competitiveness rankings for 2023, and the percentage of insurance and financial services as a part of commercial service exports.
The following data points are crucial in assessing the extent to which each country is poised for successful Insurtech adoption and growth.
Key takeaways from chart
Digital Competitiveness as a Leading Indicator of Readiness:
The countries leading in digital competitiveness—such as the United States, Netherlands, and Singapore—are positioned at the forefront of Insurtech readiness. With the United States scoring a perfect 100 in digital competitiveness, it shows the capacity for widespread technological adoption, necessary infrastructure, and a favorable environment for innovation. Similarly, Netherlands (98.1) and Singapore (97.4) reflect strong digital ecosystems, creating fertile ground for Insurtech startups and innovation in financial services.
Impact of Financial and Insurance Services on Exports:
Countries like Hong Kong (32.8%), Switzerland (22.6%), and United Kingdom (16.5%) have a significant share of insurance and financial services exports, positioning them as key players in the global financial ecosystem. The integration of insurance into their broader financial exports indicates not only their reliance on the sector but also their potential for enhancing efficiency and scalability through Insurtech solutions. As these economies continue to expand their service trade, the role of technology in improving competitiveness will become more critical.
Unique Outliers:
Luxembourg and Bahrain appear as outliers, with Luxembourg showcasing an extremely high reliance on financial services as part of their service trade (over 50%), but lagging behind in digital competitiveness. This suggests that while these countries may have a robust financial services industry, they may need to bolster their digital frameworks to fully capitalize on the Insurtech wave. Conversely, Bahrain stands out with its high financial service exports (~40%) but low digital competitiveness, underscoring the need for technological advancements to match its industry dependence.
Top Contenders for Insurtech Development:
While Switzerland, Hong Kong, and United States display both high digital competitiveness and strong financial exports, countries like Ireland, Canada, and Singapore demonstrate a balanced profile of digital readiness and a sizable financial services sector. These nations are primed for Insurtech growth, where existing digital capabilities can be leveraged to modernize traditional insurance models and capture market share in financial services exports.
Insurtech by type of trend
Parametric Insurance Trends
While parametric insurance initially gained traction by covering natural disasters, its scope has broadened significantly in recent years. It now addresses a wide range of risks, including agricultural yield shortfalls, travel disruptions, and even specific business interruptions.
In terms of sector focus, the agriculture industry continues to hold the largest share of parametric insurance premiums, given the sector’s inherent vulnerability to weather-related risks. However, the construction industry has emerged as the fastest-growing segment, reflecting increased demand for project-specific risk mitigation.
From a geographic perspective, North America maintains the largest market share, driven by high adoption rates and established regulatory frameworks. Meanwhile, the Asia-Pacific (APAC) region is experiencing the fastest growth, as both emerging markets and established economies seek innovative solutions to manage an increasingly complex risk environment.
In terms of market sizing, the Parametric Insurance market size is forecasted to grow from $12B in 2021 to $31B in 2031, worldwide due to the following growth drivers:
Advancements in sensor technology and satellite imagery
Need for financial protection against non-damage losses
Growing Natcat protection gap
Attractiveness against traditional indemnity-type products
Blockchain Insurance trends
Blockchain technology is poised to be a game-changer in the insurance industry, with blockchain-related revenues expected to skyrocket from $425 million in 2022 to $37 billion by 2030, representing a 70% CAGR.
According to a recent BCG analysis, 60% of insurance companies have already made investments in blockchain, and 80% of C-suite executives within the industry believe that blockchain has the potential to drive significant operational efficiencies.
The technology’s ability to enhance transparency, reduce fraud, and streamline claims processing is making it a vital tool for insurers looking to modernize their operations. As Insurtech continues to evolve, blockchain will play an increasingly critical role in reshaping the insurance landscape, driving innovation, and improving customer experience.
Specifically on Insurtech, the following readiness Score for Blockverse and Metaverse analysis provides a comparative benchmark of how various insurance categories—Life, Health, Property & Casualty (P&C), and Commercial/Reinsurance—are positioned to adopt and integrate emerging technologies like blockchain and the metaverse.
These scores are broken down across multiple dimensions, including business strategy, digital core infrastructure, new digital growth, and IT functions, offering insights into each sector's digital maturity and potential to capitalize on these technological innovations.
Key takeaways from chart
Business Strategy:
Health insurance leads in business strategy with a score of 3.13, indicating that companies in this category are more actively incorporating blockchain and metaverse strategies into their broader business goals. This is followed by P&C (2.82), Commercial/Reinsurance (2.79), and Life insurance lagging behind at 2.72.
Digital Core:
Across all categories, digital core readiness appears to be a weak spot, with all sectors scoring below 2.5. Life insurance scores the lowest in this category at 2.07, signaling that significant investments may be needed to modernize legacy systems.
New Digital Growth:
The readiness for new digital growth, reflecting the ability to harness emerging tech for innovation, shows relatively more strength. Health again leads with 2.67, indicating this sector's focus on expanding its digital footprint. P&C and Commercial/Reinsurance follow closely at 2.64 and 2.58, respectively, while Life insurance lags behind at 2.31.
IT Functions:
IT Functions, reflect a moderate readiness level across all sectors. Health and Commercial/Reinsurance are tied with the highest score of 2.56, while Life insurance has the lowest at 2.26, indicating a potential need for improvement in IT support and digital infrastructure.
Overall
Health insurance emerges as the most prepared sector with an overall readiness score of 2.56. P&C (2.44) and Commercial/Reinsurance (2.42) follow closely, while Life insurance, with an overall score of 2.27, trails behind, likely due to its relatively low scores in digital core and IT functions.
GenAI/ML
Generative AI (GenAI) and Machine Learning (ML) are revolutionizing various sectors by unlocking unprecedented opportunities for efficiency, innovation, and customer engagement. In industries like insurance, finance, and beyond, these technologies present opportunities such as:
Enable personalized recommendations
Streamline product development
Enhance decision-making by processing vast amounts of data.
Companies can now better target their marketing efforts
Offer tailored solutions
Improve customer service
However, these advancements are not without their risks. Amongst some of the main concerns there is:
The potential for spreading fake or inaccurate information
Lack of transparency
Perpetuating biases
The complexity of integrating these technologies into existing systems can create design and operational hurdles.
As businesses seek to capitalize on the transformative power of GenAI/ML, a careful approach is necessary to balance these opportunities with the risks, ensuring sustainable growth and innovation while safeguarding against potential downsides.
According to a study by EY, 99% of insurers are already investing or interested in investing on GenAI with Insurtech companies leading the charge as 75% of the surveyed companies already invested in GenAi, a significant amount when compared to all insurance companies that is at 42%.
Insurtech companies are leading AI adoption, with 75% already investing in GenAI capabilities. Life and Annuity (L&A) carriers follow at 62%, while 54% of group benefit providers have also integrated AI tools. However, brokers and agencies show a significant gap between interest and action—though 55% are interested in AI, only 11% have invested. This slower adoption may stem from cost, complexity, or a lack of specialized talent, putting brokers at risk of falling behind in a rapidly evolving insurance landscape.
Consumer and provider interest in select GenAI applications
Separately, The adoption of AI and digital tools in the insurance industry is shaping both provider and consumer preferences in various areas. Providers are particularly interested in leveraging AI for operational efficiency and innovation, while consumers focus more on applications that directly enhance their experiences.
The following data provides insight into how both providers and consumers prioritize different facets of insurance automation, from claims processing to personalized marketing and customer service. Understanding these dynamics is crucial for aligning digital transformation strategies with customer needs.
Key takeaways from chart
High Alignment in Consumer-Facing Technologies
Consumer-facing technologies such as chatbots, agent assistants, and claims automation show a strong alignment between provider and consumer interest. For instance, both agent assistants and claims automation have equal scores of 1.79 for consumer interest and 2.36 for provider interest. Similarly, customer service assistance and claims prevention also exhibit close alignment with both provider and consumer interest scoring above 2.07. This indicates that providers are investing in technologies that directly improve customer engagement and experience, which is in line with consumer demand for better service and faster claims handling.
Consumer-Centric Focus on Claims Prevention and Assistance
Claims prevention holds the highest interest level from consumers (2.38), followed by customer service assistance (2.08). Consumers seem particularly focused on preventing issues before they arise and improving support when needed. On the provider side, interest in claims prevention is equally high (2.36), suggesting a shared priority in reducing risk and improving proactive measures.
Divergence in Fraud Detection and Compliance
The biggest disparity between providers and consumers can be seen in fraud detection and compliance. Fraud detection has a high interest score of 1.79 from providers but a significantly lower consumer interest score of 0.92. Similarly, compliance has a much higher interest from providers (0.62) than consumers (0.34). This disparity likely reflects the fact that providers are more concerned with regulatory and risk management aspects, which are less visible to consumers.
Personalized Marketing Campaigns – High Provider Interest
Providers are highly interested in personalized marketing campaigns with a score of 2.65, one of the highest in the dataset, compared to a consumer interest score of 1.50. This indicates a strong focus from providers on using data to target and engage customers more effectively. While consumers show some interest in personalization, it is not as high a priority for them as it is for providers.
Product Development and Underwriting – Balanced Interest
Both product development and underwriting display a moderate level of interest from both providers and consumers. Product development has a provider interest score of 1.78 and a consumer interest score of 1.21, while underwriting has scores of 0.91 and 0.63, respectively. This reflects the ongoing need for innovation in insurance offerings, with both sides seeing value in product innovation and more efficient underwriting processes.
Conclusion
The Insurtech sector is rapidly reshaping the traditional insurance landscape, driven by innovations in technology such as Generative AI (GenAI), machine learning, IoT, and blockchain. As demonstrated throughout this report, these advancements are fundamentally transforming key areas of insurance, including underwriting, claims management, customer service, and risk assessment, while also enabling a more personalized, data-driven approach to policy creation.
The future of Insurtech is exceptionally bright, as evidenced by the market's exponential growth trajectory. With the global market expected to grow from $11.08 billion in 2022 to an astounding $353.5 billion by 2033, this represents a 36% CAGR—a clear indication of the industry’s potential. This significant expansion reflects the insurance sector's increasing reliance on technology to improve efficiency, reduce costs, and meet the demands of digital-first consumers.
The rising capital investments, as seen in major funding rounds in 2023, further underscore the industry's robust future prospects. Companies like Wefox and ManyPets are prime examples, securing millions in investment and achieving unicorn status with multi-billion-dollar valuations.
From an investment perspective, traditional insurers continue to play a pivotal role in fostering Insurtech's growth. Major players like Allianz, Munich Re, and Chubb are heavily investing in Insurtech, with some dedicating up to 50% of their deals to these tech-driven innovations. This ongoing commitment underscores the growing recognition that integrating advanced technologies is essential for insurers to remain competitive in an evolving market.
The global analysis of Insurtech development reveals that countries with high digital competitiveness—such as the U.S., the Netherlands, and Singapore—are leading the way in Insurtech readiness. These countries not only possess the necessary technological infrastructure but also demonstrate strong potential for scaling Insurtech solutions. In contrast, regions with a strong focus on financial services but lower digital competitiveness, like Luxembourg and Bahrain, may need to strengthen their digital frameworks to fully capitalize on the Insurtech wave.
Parametric insurance and blockchain technologies represent two key trends within the Insurtech space, with both poised for significant growth. The parametric insurance market is expected to grow from $12 billion in 2021 to $31 billion by 2031, driven by advances in sensor technology and the need for more comprehensive financial protection against non-damage losses. Meanwhile, blockchain is forecasted to grow at a remarkable 70% CAGR, revolutionizing insurance operations by enhancing transparency, reducing fraud, and streamlining claims processes.
Finally, Generative AI and machine learning are becoming indispensable tools for the insurance sector. With 75% of Insurtech companies already investing in GenAI, this technology is set to redefine customer engagement, product development, and decision-making. However, challenges remain, particularly in mitigating risks such as the perpetuation of biases, lack of transparency, and integration complexities. As insurers navigate these challenges, the key to success will be balancing innovation with careful risk management.
In conclusion, the Insurtech sector is at the forefront of revolutionizing the insurance industry. With massive market potential, increasing investments, and the adoption of cutting-edge technologies, Insurtech companies are driving the next phase of growth and innovation. As insurers continue to embrace these digital transformations, they will not only enhance operational efficiencies but also better serve the evolving needs of today's tech-savvy consumers.