TechTalk: Insurtech revolution enters a ‘second coming’ as investment shifts

When insurtechs first emerged in the insurance sector in the 2010s, they did so with the bravado that can be expected from disruptors seeking to rival traditional insurers and the challenge the status quo. 

Buoyed by promises to revolutionise the industry and its customer experience, these insurtech entities attracted significant investment attention from all four corners of the market.

More than a decade on, however, and the initial hype around insurtech appears to have quietened.

But, as the artificial intelligence (AI) boom makes waves for both insurtechs and incumbents, could this potential catalyst for the second wave of insurtech disruptors be bubbling just beneath the surface?

In 2021, optimistic investment peaked for insurtech entities. According to research published by The Global City in December 2021, UK insurtechs raised €728m (£623m) that year across 21 deals – representing over a third of all European insurtech investment.

Notably, in the same year, Bought by Many’s series D funding round of $350m (£254.5m) saw the insurtech valued at over $2bn (£1.45bn) and Zego raised $150m (£109.1m), which increased its value to $1.1bn (£799.8m).

From this peak in 2021, however, insurtech entities faced a jagged decline in investment.

Law firm McKinsey and Company’s article, published 19 September 2025 and entitled The UK insurtech landscape – strong, shifting, collaborative, revealed that only about 9% of funding targeted insurance entities in 2024, down from 75% in 2021.

Based on a 2025 survey from McKinsey and Insurtech UK, the same article also exposed that insurance entities made up around 25% of the UK insurtech population, while value chain enablers – firms which service a specific point in the value chain – amounted to 75%.

The dramatic drop in market valuations for insurance entities in early 2022 presented a large correction, especially since some of the advertised returns that insurtechs had been promising never came to fruition.

This was according to Andrew Johnston, global head of insurtech at Gallagher Re, who told Insurance Times that valuations derived as a proxy from revenue had become “frothy and overstated” due to speculative investment.

Johnston said that it’s “now apparent that a lot of the investors up to the 2021 peak may not have been deep insurance and reinsurance experts”.

Paradoxically, however, he explained that the post-Covid dip in the valuation of insurtech entities was followed by insurers and reinsurers becoming more prominent investors with a “much better understanding” of what they wanted from the insurtech landscape.

This shift, Johnston noted, shows that the market has “learned the difficult lesson of just how much cash is required to effectively burn yourself into a market”.

Speaking to Insurance Times, Ruth Polyblank, executive director at service provider Concirrus, added that a major part of this decline in valuation was because, previously, insurtech market “success was measured in funding, not in premium”.

“These swaggering insurtechs claimed that they were going to change the world, but they weren’t selling any insurance – there wasn’t a scalable, solid concept there,” she continued.

“There was just a better customer experience and, eventually, inherently bigger players just bought little parts of their technology and absorbed them – with few exceptions.”

Johnston added: “More recently, the insurtechs that have been raising capital successfully are the third-party support facilitators that are effectively software-as-a-service (SaaS) companies focused on supporting insurers [and] intermediaries to be more efficient.

“We’ve seen some insurtechs pivot entirely from a more risk-orientated focus to a supporting focus.”

More than a ‘luxury item’

But the failure of this first wave of insurtech entities to properly complete the journey from disruptors to established firms was not entirely down to the companies themselves – wider market adoption played a significant role.

Speaking to Insurance Times, Mark Huxley, founder at Huxley Advisory, said the failure of insurtechs has been partly driven by the wider insurance industry treating them as a “luxury item” rather than a necessity – with insurers often asking insurtechs to undertake free pilots or provide their technology at no cost.

He continued: “If the investors are not giving them money, if the market’s not properly seeing them for what they are or not partnering with them, then of course insurtechs are going to fail.”

Huxley added that there needs to be a perception shift from these firms being seen as “small, subscale boutique” players.

After all, he said, insurtechs are the only market entities that are going to move the needle on improving consumer outcomes and the insurance industry’s reputation.

“It’s not going to happen internally, because everything inside a larger insurance corporation is about shareholder returns, dividends and holding the financial part of the brand valuable,” he continued.

“There’s very little culture sitting at the seed level in a lot of these companies to say they are going to be a pioneer first.”

AI shake up

Perhaps the biggest shake up in the industry’s perception of the value of insurtechs has been the rapid AI race within the market, with many established companies fearing that they be left behind by more innovative, agile disruptors.

And, of course, this has shaped subsequent investment. According to Gallagher Re’s most recent Global InsurTech Report, released in August 2026, early-stage insurtech funding fell 51.8%, while a massive 99.1% of Q2 2026 insurtech funding funnelled into AI-focused companies.

Echoing these stats, Richard Chattock, chief executive at UK-based incubator and early-stage investment fund Insurtech Gateway, observed that “the biggest shift in early-stage insurtech is the dominance of AI”.

Around 80% of the companies currently coming through Insurtech Gateway are software businesses, Chattock explained, which is up from around 60% just three years ago.

He continued: “That reflects a fundamental change in where founders see the biggest opportunities to create value.

“Investors have played a major role in accelerating that trend. Scalable SaaS businesses have always been attractive to venture capital and AI has significantly increased both investor appetite and the size of funding rounds.”

This investment in AI also represents a renewed opportunity for insurtechs to prove their value to traditional insurance firms.

As incumbents have looked to launch AI use cases over the past couple of years, Marta Foy, deputy chief executive at Zego, believes that “not many of those use cases have panned out”, which will make nimble insurtechs more attractive collaborators.

She continued: “This will be a driving force behind the incumbents trying to create those relationships with insurtechs, where as previously they were held more at arm’s length and treated as annoying younger siblings.”

A matured market

The noise around insurtechs dying down does not necessarily signal the end for the insurtech revolution, however, as those firms that remain believe that disruption has not completely disappeared – just evolved.

Luisa Barile, chief executive at MGA ManyPets, told Insurance Times that “many things that felt genuinely disruptive ten years ago are simply expected today”, which is a sign of a sector that has “matured considerably”.

She explained that the gap between incumbents and insurtechs has “narrowed” as “insurtechs have learned that technology and growth do not replace the fundamentals of insurance” while “traditional insurers have become more innovative”.

But, she added, technology innovation still “requires a shift in operating model and culture”, which she believes is where “insurtechs can still lead the way”.

She continued: “A lot of what insurtechs pioneered has now been adopted by the broader market, so disruption today is less about introducing a new technology or feature and more about demonstrating how quickly an insurance business can change.”

The rise of AI makes that “particularly visible” as insurtechs have fewer legacy constraints and more modern technology, which enables them to experiment and scale at a significantly faster pace, she explained.

However, alongside this increasing investment in AI startups lies the risk that the market could once again enter the hype cycle.

Indeed, Johnston warned that the market is beginning to see a similar “speculation creep” to the initial insurtech boom and its high watermark valuations.

“There’s a huge amount of anticipated disruption and value creation that is being associated with AI that a lot of those general venture capital and private equity firms are starting to pay attention to,” he concluded.

“There is this second coming of some speculation and, if you look at some of the insurtechs that have raised capital even this quarter, relative to revenue – you could argue that some of the valuations are a little bit lofty.”