This author predicts 2025 will be a year in which insurtech solutions will be further adopted at scale by large and mid-sized carriers and MGAs. (Credit: ra2 studio/Adobe Stock)
Roughly $55 billion has been invested in insurtech thus far, according to a Gallagher Re report. While we can debate whether all of that investment has been well spent, it is irrefutable that insurtech has grown in adoption, stimulated fresh ideas and kickstarted new ways of working across the insurance industry.
With generative AI ushering in new possibilities for efficiency and personalization, carriers and MGAs must be ready to meet the moment. Although there certainly are no guarantees, these five insurtech trends are most likely to shape the market in 2025.
No. 1: The appetite for insurtech will continue to expand.
If you just read the headline on Gallagher Re’s Q1 2024 report, you might be inclined to think the insurtech market is in a slump. After all, total insurtech funding for the first quarter of 2024 slipped below $1 billion for the first time in four years.
A deeper dive, however, shows the opposite trend, revealing the number of insurtech deals actually increased by 7% from quarter to quarter. This finding indicates insurtech remains an extremely attractive market segment, and I expect that to continue through 2025.
However, what cannot be ignored is that insurtech valuations and average deal sizes have decreased in the past two years. These unique market conditions have created a “survival of the fittest” environment. Companies built on solid financial foundations that can also demonstrate real, practical impact on the bottom lines of their customers will continue to attract clients and if needed, investors. Those that raised money at historically very high valuations or needed to raise money in the last two years may struggle to validate their value and are more likely to fail faster. The refreshed insurtech community that is emerging, and in many cases thriving, will do so well beyond 2025.
No. 2: Insurtech adoption will increase among large carriers and MGAs.
Larger carriers are increasingly turning to insurtech solution providers at a faster rate, a trend that will extend into 2025. In particular, carriers will continue to prioritize investments in solutions that are core to their operations. The caveat is that large carriers will want reassurance that both the solution and the company are in it for the long haul. To this end, insurtechs that have shown good business management will have stronger financials and an increasing track record of success. This will mean they are more highly regarded and suitable for strategic use and as a result, will gain further market advantage in 2025.
When it comes to MGAs — often a bellwether for the industry at large — we are starting to see some fundamental shifts in the market. By nature, most MGAs are lean and focused, but they still need insurance capacity to be successful, and capacity remains scarce as we enter the sixth year of a hard market. As a result, we are seeing private equity-backed aggregators acquire and consolidate multiple MGAs. These aggregators represent fertile ground for solution providers that can help them streamline processes across their portfolio of MGAs.
No. 3: Personalization and customer experience (CX) will win the day.
In 2025, both large carriers and MGAs will seek to tap into emerging P&C growth markets, including small and medium-sized enterprises, cyber, commercial specialty and individual niches. Yet each of these areas is becoming more retail-like. To win these markets, organizations must differentiate themselves with exceptional customer experiences.
Consider, for example, one of the most successful MGAs in the US focused on insuring high-net-worth individuals. Wealthier customers own valuable assets across multiple classes, including yachts, paintings, and residential and commercial buildings. Accordingly, they have exceptionally high expectations for customer service. Any MGA serving this market will need tools that track the entire customer journey, allowing them to provide the type of hyper-personalized experiences their customers expect. This desire within society for high-touch customer service and personalization is increasingly cascading down market to all consumer segments both in and outside of insurance, driven by rising consumer expectations heavily influenced by their growing online experiences.
Another key to successfully embracing growth areas is accelerating speed to market. In 2025, larger carriers and MGAs must act with the agility of a smaller firm to achieve success. Platforms like INSTANDA are designed to help insurers build and implement complex insurance processes in weeks or months, allowing them to seize new opportunities and address market niches faster.
No. 4: AI will continue to grow in sophistication.
Insurtech investors are making huge bets on AI, as evidenced by the recent raise of $6.6 billion by Open AI and interestingly the $120 million Series C funding round for AKUR8, a machine learning-enabled pricing and reserving platform. The AI space is moving tremendously fast, and carriers and MGAs should deploy AI responsibly and only in areas where it will make the biggest impact on the business without introducing new compliance risks.
In my opinion, AI — especially generative AI — is an arms race that megacompanies like Microsoft, Open AI and Google will ultimately win. The key for insurtechs will be to find slivers of generative AI and apply them to specific insurance-related functions to drive industry-wide transformation.
An excellent first step for carriers and MGAs is to implement generative AI-powered chatbots, which are becoming increasingly sophisticated. I believe AI chatbots will handle most customer interactions within the next three-to-five years.
Chatbots, however, represent just one part of the insurance value chain. A bold next step is using AI to create fundamental industry change. This includes integrating AI into processes like pricing, risk selection and underwriting, all of which I see advancing over the next 12 to 18 months.
How far will AI take us? That remains to be seen. But I envision a future where AI allows carriers to create holistic services encompassing all markets — property and casualty, life and health. A variety of regulations make this prohibitive right now. But imagine the potential power of AI as a concierge booking agent, helping small business owners select the right products for property, auto and health insurance from different carriers, then bundling them together. Now that would be truly transformational.
Before AI can create this type of disruption, regulators will need to catch up. The European Union’s AI Act passed earlier this year represents a first step in creating a comprehensive legal framework around AI. Carriers, MGAs, and insurtech companies must pay attention to future regulations and ensure compliance to avoid the many potential reputational and financial risks AI could produce.
No. 5: Some solution providers will continue to sow seeds of confusion.
One unfortunate byproduct of the insurtech market is how some solution providers — often incumbents — mislabel their products to hide their shortcomings. This past year, we saw several companies use terms like “low code” when, in reality, their solutions cannot be optimized unless the highly technical end user knows how to code.
In 2025 and beyond, the potential exists for continued confusion. Ironically, as companies gravitate toward using generative AI for coding, English is becoming the primary coding language, not Java or C++. As a result, we may see less mislabeling around no-code versus low code. But in its place will be newfound questions about whether a solution is truly “AI-powered,” along with numerous interpretations of what those words might mean.
How can insurers and MGAs protect themselves amid this uncertainty? I recommend moving beyond technical jargon. Instead, insurers should evaluate solution providers based on their record of delivering results for specific items in the insurance value chain. Two key areas to focus on are speed of implementation and unit economics.
Tips for insurance agents and brokers
While some agents and brokers may fear innovations like AI will replace their role, I envision a future where the best agents and brokers will use AI to deliver higher levels of service to their customers.
Right now, chatbots offer a potentially huge value-add to agents and brokers. Those who can take existing AI-powered chatbots and customize them to complement their existing business models will benefit from higher-value customer conversations that will drive engagement and retention.
One other big idea that could help brokers, agents and their carrier partners would be a shared online marketplace where brokers could place risks and carriers could provide pricing in real time. The technology to create such a marketplace already exists, but agents, brokers and insurers would need to commit to full transparency to make this type of innovation a reality.
The time for adoption is now
Above all, I predict 2025 will be a year where insurtech solutions will be further adopted at scale by large and mid-sized carriers and MGAs. To make the right bets, insurers should stress-test solutions to confirm they will work as expected and bring actual value. Simultaneously, solution providers should begin developing AI use cases that will drive fundamental industry-wide transformation. By working together, we can ensure the billions invested in insurtech now and in the future will pay huge dividends for our customers and our industry.
Tim Hardcastle is the CEO of INSTANDA, which provides insurance software solutions for carriers, MGAs and brokers. Prior to joining INSTANDA, Hardcastle served as a chief information officer for Hiscox PLC and Jarvis PLC. He can be reached at tim.hardcastle@instanda.com.
Opinions expressed here are the author's own.
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