I’m thrilled to sit down with Dr. Andrew Johnston, the Global Head of Gallagher Re, whose expertise in InsurTech and global investment trends offers unparalleled insights into the evolving landscape of insurance technology. With a career dedicated to analyzing market dynamics and fostering innovation, Dr. Johnston has been at the forefront of understanding how funding patterns, AI integration, and sector-specific shifts shape the future of insurance. In this interview, we dive into the latest Q2 2025 InsurTech funding trends, exploring the stark contrasts between Property & Casualty and Life & Health sectors, the transformative role of AI, and the broader implications for startups and investors alike. Join us as we unpack the challenges, opportunities, and emerging forces driving this dynamic industry.
What can you tell us about the overall state of InsurTech funding in Q2 2025, especially with the $1.1 billion raised marking one of the weakest quarters recently?
It’s true that Q2 2025 was a challenging period for InsurTech funding, with a 16.7% drop quarter-over-quarter to $1.1 billion. This figure reflects a broader caution among investors, influenced by macroeconomic uncertainties and a more selective approach to capital allocation. What stands out, though, is the uneven distribution of this funding across different segments of the industry. While the headline number suggests a slowdown, it masks some exciting undercurrents, like the surge in Life & Health InsurTechs, which nearly tripled their funding to $728 million. So, while the overall decline signals a cooling period, it’s not a uniform story of retreat but rather one of shifting priorities.
How do you interpret the significant slowdown in funding momentum since the peak years, where $20 billion was raised in just 18 months, compared to the latest $10 billion taking over three years?
The peak years around 2020-2021 were a perfect storm of low interest rates, abundant capital, and a rush to digitize industries like insurance in the wake of global disruptions. Investors poured money into InsurTechs with high growth potential, often prioritizing scale over profitability. Since 2022, we’ve seen a market correction—higher interest rates, tighter capital markets, and a push for sustainable business models have slowed the pace. The latest $10 billion taking over three years to raise reflects this shift toward caution. Investors now demand clearer paths to profitability and proven use cases, which has lengthened funding timelines but, in my view, is ultimately creating a healthier ecosystem with stronger fundamentals.
Why do you think Property & Casualty InsurTechs faced such a steep 68% funding drop to $362 million, and what does this mean for their future?
The 68% drop in Property & Casualty (P&C) funding to $362 million in Q2 2025 is striking, and it’s largely tied to a combination of market saturation and perceived risk. Many P&C startups have struggled to differentiate themselves in a crowded space, and with average deal sizes dropping to just $6.35 million—the lowest since 2014—investors seem hesitant to bet big. There’s also a sense that P&C solutions face more complex regulatory and operational hurdles compared to other segments. Looking ahead, this could push P&C InsurTechs to focus on niche markets or innovative risk models to regain investor confidence, but it’s a tough road for many in the short term.
In contrast, what’s fueling the nearly tripled funding for Life & Health InsurTechs at $728 million, and how sustainable is this surge?
Life & Health (L&H) InsurTechs hitting $728 million in Q2—nearly triple the prior quarter—is a testament to their alignment with current investor priorities. These companies are addressing pressing needs like personalized health solutions and aging populations, which resonate deeply in today’s market. Major deals, like Gravie’s $144 million round, highlight how late-stage L&H firms are scaling with compelling offerings. The sustainability of this surge depends on whether these startups can maintain momentum through measurable outcomes—think improved customer engagement or cost efficiencies. If they can deliver, I believe this interest could persist, especially as demographic trends continue to favor health-focused innovation.
AI seems to dominate the conversation, with over 57% of Q2 deals focusing on AI-centered InsurTechs. What’s driving this intense investor interest in AI within insurance?
AI’s dominance in Q2, with 57.1% of deals and $583 million raised across 52 transactions, reflects its transformative potential in insurance. Investors are drawn to AI because it promises to revolutionize everything from underwriting to claims processing and customer service. It’s about efficiency—AI can analyze vast datasets for better risk assessment—and personalization, tailoring policies to individual needs. Beyond that, with global AI investment reaching $1.6 trillion since 2013, there’s a broader tech momentum that’s spilling into InsurTech. Investors see AI as a generational shift, and they’re betting on companies that can harness it to disrupt traditional insurance models.
Can you share how AI tools are practically changing the insurance landscape, perhaps drawing on examples like those from innovative startups?
Absolutely. AI is reshaping insurance in tangible ways. Take tools developed by startups focusing on commercial underwriting—they’re using AI to process complex data sets in real-time, enabling faster, more accurate risk evaluations. Similarly, AI assistants for sales teams are automating routine tasks, freeing up agents to focus on building relationships and closing deals. These innovations cut costs and improve customer experiences, which is a win-win for insurers and policyholders. What’s exciting is that nearly half of these AI deals in Q2 were early-stage, suggesting we’re just scratching the surface of what’s possible as these technologies mature.
Despite the hype, there’s skepticism in the reinsurance market about AI’s long-term impact. How would you address those doubts and make the case for AI’s staying power in insurance?
Skepticism in the reinsurance market often stems from concerns about AI’s reliability, regulatory challenges, and the risk of overhyping unproven tech. I understand the caution—AI isn’t a magic bullet, and not every application will deliver. However, I’d argue AI’s staying power lies in its ability to evolve alongside industry needs. It’s already proving itself in areas like predictive analytics for catastrophe modeling, which is critical for reinsurers. The key is for InsurTechs to focus on measurable results—showing carriers and customers real improvements in efficiency or risk management. As long as AI continues to adapt and deliver value, I’m confident it will become an integral part of the insurance ecosystem, not just a passing trend.
What’s your forecast for the trajectory of InsurTech funding and AI integration over the next few years, given the current trends and market dynamics?
Looking ahead, I expect InsurTech funding to stabilize rather than return to the frenzied peaks of 2020-2021. Investors will likely remain selective, prioritizing startups with strong fundamentals and clear AI-driven value propositions. AI integration will deepen, moving beyond niche applications to become a core component of insurance operations—think end-to-end automation of claims or hyper-personalized pricing models. The challenge will be balancing innovation with regulation and ensuring data privacy, especially as AI adoption scales. I also foresee Life & Health maintaining its edge over Property & Casualty, unless P&C startups can carve out distinct niches. Overall, the next few years will be about consolidation and proving out these technologies, setting the stage for a more mature, impactful InsurTech sector.