Global insurtech funding dipped to $US1.63 billion ($2.27 billion) in the first quarter, with 95% going to AI-focused companies.

There were 81 deals and average deal size rose 23% on the preceding quarter to $US23.23 million ($32.3 million), the highest level since late 2021, the Gallagher Re Global Insurtech Report says.

Early-stage insurtech funding surged 36% to $US548.5 million ($762.4 million), the highest since late 2022.

“Bucking the ... three-year trend of quarterly funding of around $US1 billion ($1.39 billion), the first quarter provides further evidence that there is a return of capital into this space – and strikingly, 95% went to AI-focused companies,” Gallagher Re global head of insurtech Andrew Johnston said.

AI-centred insurtechs raised $US1.55 billion ($2.15 billion) across 68 deals. All the quarter’s top 10 deals by funding amount went to AI-focused companies, including Testudo backed by QBE, ICEYE backed by Axa XL, and Lemonade backed by Tesla.

Also among the first-quarter deals was Melbourne-based AutoGrab, a software business founded in 2020 that provides vehicle pricing, inventory management and market analysis for insurers, dealerships and lenders. It raised $US55.3 million ($76.9 million).

Mr Johnston says AI liability insurance is “merely the new cutting edge” of digital innovation, and it refers to computer systems capable of performing tasks that typically require human qualities such as reasoning, learning, decision-making and perception.

“If the input/output processes are not mimicking human cognition, it is probably not true AI,” he said. “As an industry, we are still guilty of talking about AI with broad-brush vagueness ... when speaking about the power of AI, they are actually describing the naturally evolving process of digitisation and automation more broadly, without any real indication of true AI innovation.

“To all intents and purposes, ‘AI’ and ‘insurtech’ now form a Venn diagram whose circles overlap almost completely ... AI is merely the latest innovation on the insurtech block – but it is certainly a transformational one.”

Mr Johnston says the data may be “a little misleading” as companies call themselves AI because it is “in vogue”.

Gallagher Re says the most popular uses for AI are in IT operations management, client-facing functions such as chatbots, and research and analytics.

See the report here.