Insurtech funding report addresses AI job replacements

While insurtech funding dipped below US$1 billion in 2024’s first quarter — its lowest level in four years — AI-centered and distribution-focused firms are getting the lion’s share of deals, according to a new report by Gallagher Re.  

Funding fell from US$1.103 billion in the final quarter of 2023 to US$912.25 million in 2024’s Q1, according to Gallagher Re’s Global InsurTech Report. 

AI-centered insurtechs accounted for 28% of deals in the most recent quarter — slightly higher than average compared to overall insurtech deals. Globally, 16 of the 30 AI-centered insurtech deals went to early-stage companies.

Average deal size for those centered on AI was more than US$2 million larger than those not centered on AI (US$6.06 million compared to US$3.81 million, respectively). 

“Investors have been gravitating toward this field,” Gallagher Re writes. “There might be a fear in some quarters that AI is set to replace jobs in distribution, but this is highly unlikely.  

“AI is an aid to distribution when used in the right way. Ignore it, and its presence utilized by competitors could become a strong headwind. Embrace it, and it could unlock many opportunities and cost efficiencies.” 

And, Gallagher notes, it is the distribution-focussed insurtechs that pulled far ahead of the pack, with half of global insurtech deals going toward those with a distribution focus.

A full 54 of 107 deals went to distribution-focussed companies, while 11 of these went to insurtechs focussed on embedded or white-label insurance distribution.  

That said, average deal size fell by 30.6% quarter over quarter — from US$14.14 million at the end of 2023 Q4 to US$9.81 million in first quarter 2024.  

Activity in Canada 

The report finds Canada’s insurtech sector among the winners in 2024’s first quarter funding round.

Toronto-based WiseDocs accounts for one out of two of this year’s first deals. Founded in 2018, the company specializes in AI-driven document processing for the insurance and legal industries. It received US$13.6 million in total funding from nine investors.  

Armilla AI, another Toronto-based company, received US$5.3 million in technology investment for its AI-based governance platform.  

Other notable partnerships include: 

• Small business insurance-based startup Foxquilt, which is headquartered in Toronto and received a reinsurance investment from Markel, and; 
• Majesco, which will implement new business and renewal systems for Desjardins’ group-benefits business.

Between 2012 and the first quarter of 2024, about 2% of insurtech deals were transacted in Canada — the seventh highest globally. Comparatively, 49% were transacted in the U.S. 

Feature image by iStock.com/marchmeena29