But a new challenge has emerged. As the world grapples with climate volatility, cyberattacks, and aging populations, the next frontier for insurtech may lie in something much bigger: using artificial intelligence (AI) to help close the global protection gap between those who are insured and those left vulnerable.
Insurtech Finds Its Footing in a Volatile World
In recent years, global markets have been anything but predictable. Economic uncertainty, inflation, and geopolitical shocks have rattled nearly every sector. Yet, amid the turbulence, insurtech has quietly stabilized.
Venture investment in the sector has found its rhythm again roughly $1.5 billion per quarter, back to where it stood before the pandemic. The “growth at all costs” era has given way to a more measured approach, where investors look for sustainability instead of speed. Late-stage funding rounds particularly Series C and beyond have risen from 100 in 2023 to 150 in 2024, showing a maturing market and deeper investor confidence.
Europe offers one of the strongest examples of this shift. Of around 800 insurtechs launched between 2015 and 2023, roughly 85% remain active, 10% have been acquired, and only 5% have exited. Nearly half of these firms now employ more than ten people proof that the European ecosystem is not only stable but scaling.
The message is clear: capital is no longer chasing disruption for its own sake. It’s backing businesses built to last those combining innovation with operational and financial discipline.
The New Frontier: Covering the Uncovered
For decades, insurance has been anchored in familiar areas like property, auto, and life coverage. But the landscape of risk is shifting fast. The biggest opportunities ahead lie in the spaces where protection is thin or nonexistent.
Cyber Risk: The Unseen Wildfire
Cyber risk has become one of the defining threats of the digital era. The cyberinsurance market has more than doubled since 2022, reaching $11 billion in premiums in 2024. Still, the supply of coverage lags far behind demand. Many insurers remain cautious, wary of complex exposures and chain-reaction losses.
That gap is being filled by AI-driven insurtechs specializing in cyber analytics, digital asset protection, and real-time threat prevention. These firms aren’t just underwriting cyber risk, they’re helping businesses predict and reduce it.
Climate Risk: The Uninsured Majority
The climate crisis has rewritten the rulebook for risk. Once considered unpredictable “acts of God,” extreme weather events are now measurable, modelable and insurable. Yet, about two-thirds of global climate risk remains uninsured.
The numbers are sobering: insured losses from natural disasters have doubled in the last two decades, from around $58 billion annually to more than $116 billion. The gap represents both a commercial opening and a moral obligation. Protecting the communities most exposed to climate extremes is becoming one of the industry’s most pressing responsibilities.
Health & Demographics: A New Kind of Protection
Shifts in lifestyle, aging populations, and new work patterns are forcing insurers to rethink how health and wellness coverage should work. Demand is growing for preventive health plans, fertility and family coverage, remote care, and insurance for chronic conditions.
Entire groups such as gig workers, older adults, and people in informal employment remain largely unprotected. The next wave of insurtech innovation could bring these groups into the fold, creating policies designed around people’s realities instead of rigid legacy categories.
Despite the vast potential, only 5% of insurtechs currently target these new risk areas. McKinsey estimates these segments represented less than $200 billion in premiums in 2023, compared with a $4.1 trillion global insurance market. That’s a multi-trillion-dollar protection gap and an open field for forward-thinking firms.
Where AI and Insurtech Intersect
Insurtechs have always been agile, willing to experiment where traditional insurers hesitate. Now, with AI, that agility is being amplified.
Across the UK, about 70% of insurtechs are running AI pilots, and over 90% plan to integrate generative AI into their operations in the coming year. What started as an experiment has become the backbone of underwriting, claims management, and customer experience.
Here’s what AI is already changing:
Underwriting: Algorithms can process complex data in seconds, improving accuracy while minimizing human bias.
Fraud Detection: AI systems spot unusual patterns before they trigger major losses.
Customer Service: Conversational tools can guide customers through policies and claims in plain, human language.
Productivity: Some firms have tripled the amount of business written per employee, thanks to automation and smart triage.
But AI’s most powerful impact may be predictive prevention. Instead of waiting for a loss to occur, insurers can now anticipate and mitigate risks. Early data suggests that AI can improve loss ratios by 40–50%, transforming both profitability and customer satisfaction.
The benefits go beyond efficiency. With stronger data analytics, insurers can tap into capital markets through insurance-linked securities (ILS) allowing risk to be shared and priced more effectively on a global scale.
What Established Insurers Can Learn
For traditional insurers, innovation often collides with inertia. Legacy systems, compliance hurdles, and risk-averse cultures make transformation difficult. Yet, AI offers a genuine opening to modernize from the inside out if approached strategically.
Here’s what leading incumbents are doing:
Start with Culture. Digital transformation is about mindset, not just machinery. Change management has to be a leadership priority.
Collaborate Smartly. Partnering with insurtechs and regtechs can accelerate innovation while keeping regulators comfortable.
Modernize Gradually. Phased, AI-assisted upgrades allow core systems to evolve without breaking day-to-day operations.
Adopt a Dual-Speed Model. Keep experimental projects separate from core business functions to balance innovation and stability.
From Technology to Trust
The global protection gap across cyber, climate, and health isn’t simply an insurance problem. It’s an economic and social one.
AI gives the industry a way to tackle it head-on. When combined with human judgment and creativity, technology can help design products that protect the underserved, rebuild trust, and make insurance more relevant to modern life.
The winners in this new era won’t be the ones who automate the fastest. They’ll be the ones who see technology as a means to inclusion, resilience, and trust.
Ultimately, the promise of AI in insurance isn’t about replacing people. It’s about empowering them to deliver protection that’s universal, adaptive, and, above all, deeply human.
