Insurtech investment roars back in Q1

By Doug Bailey

After several quarters of stagnant growth and investor fatigue, the insurtech sector roared into 2025 with renewed purpose, thanks in large part to a technology that’s no longer futuristic — just fundamental.

Global insurtech funding rose 90.2% in the first quarter of 2025 to $1.31 billion, marking the sector’s strongest performance since the third quarter of 2022, according to Gallagher Re’s latest Global InsurTech Report. The rebound was led by a wave of investment in AI-powered platforms, especially in property and casualty insurance, as more insurers look for practical ways to automate, improve, and compete.

In all, 61% of insurtech deal volume in the first quarter went to AI-centered startups. That translates to $710.9 million across 60 transactions—many of them aimed at underwriting, claims, and real-time risk modeling.

“This feels less like a funding bounce and more like a market correction—one that favors grounded, deployable technologies over shiny concepts and unicorn dreams,” said Brian McLoughlin, co-founder of MTech Capital, in the report.

The shift reflects an industry now well into its second decade of experimentation with technology—and finally settling into what may be a more sustainable, albeit narrower, growth path.

An 'insurtech spring'?

The leap in capital deployment marks a sharp reversal from the industry’s sluggish finish to 2024, when funding dipped to $690 million amid investor caution and a slowdown in mega-rounds. Analysts are now hailing a possible “insurtech spring,” with signs that a more sustainable, tech-driven transformation is underway across property and casualty (P&C), life, and health insurance markets.

“This is not just a rebound,” said Dr. Andrew Johnston, Global Head of InsurTech at Gallagher Re and editor of the report. “We are seeing an evolution in maturity, focus, and execution—especially around AI. What’s changed is that the capital is being allocated with much greater discipline.”

The lion’s share of the action was in the P&C space. Funding to P&C insurtech soared 175.8% quarter-over-quarter to $1.13 billion, accounting for nearly 87% of total investment. Nine of the top ten funding rounds targeted P&C ventures, including $175 million for Quantexa, $123 million for Openly, and $100 million for Instabase.

By contrast, funding for life and health InsurTechs fell 34.6% to $183 million.

Deal volume also increased meaningfully. The quarter saw 97 insurtech transactions—a four-quarter high—up from 78 in Q4 2024. The average deal size rose 42.1% to $15.77 million.

Early-stage insurtech

Yet not everyone was cashing in. Early-stage insurtech brought in just $170.8 million in Q1—an 11.9% drop from the prior quarter and the lowest level in nearly five years. Deal sizes at the early stage averaged just $3.7 million, down from $4.7 million in Q4.

In short, while the tide is rising, it’s lifting the bigger boats more than the smaller ones.

The market’s newfound discipline is rooted in AI’s measurable utility. Rather than pitch “disruption,” a growing number of InsurTechs are promising something far more appealing to carriers: results.

From automated data entry to predictive analytics and claims triage, AI is now being used to streamline the insurance value chain. In the motor insurance space alone, companies like Zego and Nirvana are using real-time telematics to fine-tune pricing and reduce losses. Zego claims it can cancel persistently reckless drivers within two weeks. Nirvana says it’s using 20 billion miles of data to inform dynamic underwriting and claims resolution, shaving overhead, and improving customer experience.

A 'new era' of AI, IoT data

"We've entered a new era of AI and IoT data,” said Nirvana CEO Rushil Goel in the report. “Insurers can harness that data to drive unparalleled results—not only in top-decile loss ratios, but also in a new standard of customer experience.”

That pragmatism is winning over more (re)insurers. A record 45 tech investments came from insurers in Q1, with Blue Venture Fund, MassMutual Ventures, and Munich Re Ventures among the most active.

“AI is being operationalized—not theorized,” said Freddie Scarratt, deputy global head of InsurTech at Gallagher Re. “That’s a major shift, and it’s why capital is returning.”

Auto-focused InsurTechs raised $429 million in Q1, a testament to the enduring size and complexity of the global motor market. Since 2012, auto/motor InsurTechs have raised roughly $13.1 billion—about 22% of all InsurTech funding. The report attributes that attention to the sector’s rich data landscape and the proliferation of built-in telemetry in modern vehicles.

Auto slow to change

Still, the auto insurance business is still brutally competitive and slow to change. Even as AI enables usage-based pricing and real-time risk scoring, scale and regulatory acceptance remain key hurdles. Insurers must walk a fine line between precision and fairness—lest they price too accurately and leave swaths of consumers uninsured.

The report also cautions about a “hyper-fixation of risk,” where ever-finer data granularity could inadvertently expand the protection gap. As AI improves pricing, it also threatens to make insurance unaffordable for riskier drivers.

Some observers have dubbed the Q1 resurgence an “insurtech spring,” driven not just by new funding but by a maturing ecosystem. Strategic acquisitions—from Munich Re’s $2.6 billion purchase of Next Insurance to Guidewire’s pickup of pricing software firm Quantee—signal that proven players are no longer sitting on the sidelines.

The optimism is real, but it comes with caveats. Funding is still well below the sector’s 2021 peak, and early-stage companies continue to face steep challenges raising capital. Venture capitalists, meanwhile, are asking harder questions—and rewarding fewer bets.

But if the latest numbers are any sign, the market may be entering a more rational, ROI-driven phase. And that may be just what the industry needs.

As Zego CEO Sten Saar put it: “Risk isn’t going anywhere—and neither is the need for insurance.”