Funds raised globally by insurtechs halved to $US688.24 million ($1.09 billion) in the fourth quarter compared with the preceding three months, and annual levels hit a seven-year low.

AI-centred insurtech accounted for 42% of the 78 deals in the quarter, and half of these had a focus on claims, Gallagher Re says.

Full-year funding was down 6% compared with 2023 to $US4.25 billion ($6.76 billion) – the lowest since 2018. Early-stage funding and average deal sizes were “bright spots”.

There were 344 deals last year, down 19% to a six-year low.

Global head of Gallagher Re insurtech Andrew Johnston says the Q4 funding totals “represented a sharp turn of events”.

“Broadly, 2024 can be seen as a year of two halves – a fairly predictable yet encouraging H1, followed by a more volatile H2 with an initial surge in mega-round activity followed by a sharp decrease in funding in Q4,” he said.  

There was continued AI acceptance, with pilots, proofs of concept, use cases, technological development and “further bedding-in of AI being used in real life scenarios”, he says.

“AI is a buzzword ... It is easy to dismiss some of this as hype ... But it is also a genuine reflection of how much excitement there is in the industry,” Mr Johnston said.

But he adds that AI’s “current value, if we’re honest, has been limited”.

“It has not revolutionised role types, freed up people’s time or delivered on the kinds of efficiency gains that we might have expected, but we must give it time. Much like insurtech more broadly, AI must be part of a use case that is commercially sound and supports a broader set of business objectives.”

He says one clear use case is employing AI to help underwriters make better risk selections, whereas sending customers “down company rabbit holes where call centres once existed is not”.

“If insurtech taught us anything, it is that just because you can do something, does not mean you should,” Mr Johnston said. 

See the Gallagher report here.