Digital Transformation in Insurance Industry Statistics 2026: AI, Funding and Claims

Global InsurTech funding reached $2.44 billion in Q2 2026, the highest since Q2’22, and 99.1% of that funding flowed to AI-focused companies, according to Gallagher Re. Those two numbers anchor the digital transformation in insurance industry statistics below, and the money follows a shift that supervisors already see inside carriers. In the Bank of England and FCA survey, the insurance sector reported the highest percentage of firms currently using AI at 95%.

Adoption and scale are different measurements. EIOPA found nearly two-thirds of European insurers already actively using Gen AI, while most are still at a proof-of-concept stage. The figures below track four layers: capital flowing into InsurTech, AI use inside insurers, digital sales to customers, and the claims and core systems underneath.

Key Takeaways

• 99.1% of Q2 2026 InsurTech funding flowed to AI-focused companies, comprising $2.42 billion.
• Early-stage funding fell 51.8% quarter-on-quarter, from $548.0 million to $264.19 million.
• The insurance sector reported the highest AI use among UK financial sectors at 95%, closely followed by international banks at 94%.
• In the NAIC’s health survey, 84% of health insurers report they currently utilize AI/ML in some capacity.
• Lemonade’s LAE ratio declined to a record low 5%, against industry-average LAE ratios of approximately 9%.
• Nearly half (47%) of all new auto and home insurance policies are now purchased digitally, per JD Power.
• Guidewire’s subscription and support revenue rose 33% to $970.9 million in fiscal year 2026, while license revenue fell 7%.

Editor’s Choice

• Full-year InsurTech funding: $5.08 billion in 2025, the first annual increase since 2021.
• Highest quarterly InsurTech funding since Q2’22: $2.44 billion in Q2 2026.
• Guidewire annual recurring revenue: $1,242 million as of July 31, 2026.
• Lemonade in-force premium: $1.43 billion, up 32.4%.
• European insurers in EIOPA’s Gen AI survey: 347 undertakings across 25 countries.
• US health insurers in the NAIC survey: 93 companies, surveyed by 16 states.
• Insurers running Guidewire products: more than 570 insurers in 44 countries.

Digital Transformation in Insurance Industry Statistics: InsurTech Investment

• Global InsurTech funding rose 19.5% year on year, marking the first annual increase since 2021.
• Funding dropped 5.6% the year before, between 2023 and 2024.
• P&C InsurTech funding rebounded from 2024’s low, increasing 34.9% year on year.
• By Q2 2025, InsurTechs had raised a total of $60 billion since records began in 2012, with around $15 billion (25%) going into AI-related technologies, by Gallagher Re’s count.
• Over 100 InsurTechs raised funding in Q4’25, the first time since Q1’24.

Source: Gallagher Re Global InsurTech Reports, Q4 2024 to Q4 2025

About This Data

Compiled from 29 sourced figures across 9 publishers, gathered in September 2026. The mix is 16 from primary sources (EIOPA, the NAIC, the Bank of England and FCA, and filings or releases from Lemonade, Root and Guidewire) and 13 from industry research (Gallagher Re’s InsurTech reports, JD Power and Deloitte). Sources run from 2024 to September 2026. No market-research seller qualified, and figures update when these publishers release new editions.

Don't chase the news. Let us curate it.

You get one weekly briefing with only the stories that matter. If the market is quiet, we skip it.

Email address

Get the Weekly Briefing - it's free!

Read by pros at Visa, Mastercard, Vanguard, and the FDIC.

What is digital transformation in insurance?

Digital transformation in insurance is the move of underwriting, distribution, claims, and core policy systems onto data, AI, and cloud platforms. Deloitte says the emphasis on technology modernization has shifted to executing real AI use cases at scale, strengthening data foundations, and aligning architecture and security.

Quarterly InsurTech Funding Statistics

• Global InsurTech funding halved quarter-on-quarter, from $1.38 billion in Q3’24 to $688.24 million in Q4 2024.
• Funding then surged 90.2% quarter-on-quarter in Q1’25.
• Global InsurTech funding declined 16.7% quarter-on-quarter to $1.09 billion in Q2’25.
• The average deal size fell 18.7% quarter-on-quarter to $12.83 million in Q2’25, while deal count dipped 6.2% to 91.
• Global InsurTech funding was $1.01 billion in Q3 2025, with just 76 deals, the lowest count since Q2 2020.
• Q4 funding surged 66.8%, from $1.01 billion in Q3’25 to $1.68 billion in Q4’25.
• Deal count rose 34.2% quarter-on-quarter to 102 in Q4’25, with average deal size up 20.0% to $18.84 million.
• Global InsurTech funding reached $1.63 billion in Q1 2026, as average deal sizes climbed 23.3% quarter-on-quarter.

The last three quarters sit well above the flat run that preceded them, which is the clearest sign that investors see a second InsurTech cycle, this time built around AI rather than direct-to-consumer carriers.

Recent Developments

• September 3, 2026, Guidewire reported fourth-quarter fiscal year 2026 revenue of $411.1 million, up 15%, with subscription and support revenue up 32% to $266.7 million.
• Q2 2026, Gallagher Re reported that (re)insurance companies backed 27 tech investments in Q2 2026, down from 32 in Q1’26.
• Q2 2026, Root’s shareholder letter said it launched in New Jersey, bringing Root to 37 states and more than 80% of the U.S. population.
• Q2 2026, Root announced a partnership with Jerry, an insurance shopping platform.
• Q2 2026, Lemonade reported that second-quarter revenue grew 79% to $294 million.
• Q2 2026, Lemonade said gross profit increased 76% YoY to a record $113 million.

AI Share of InsurTech Funding

• AI-centered InsurTechs accounted for 42.3% of deals in Q4’24.
• 61.2% of Q1’25 InsurTech deals went to AI-centered companies, worth $710.86 million.
• 57.1% of InsurTech deals went to AI-centered companies in Q2’25.
• InsurTechs tied to AI liability and cyber insurance raised over $440 million in Q1 2026.

The highest quarterly funding since Q2’22 is arriving alongside what Gallagher Re calls a possible narrowing of the innovation pipeline. Early-stage funding fell by half in the same quarter that AI took almost every dollar, so more of the capital sits in large rounds.

What are the current technology trends in the insurance industry?

Practical AI use cases and stronger data foundations lead the current agenda. While AI pilots filled last year’s headlines, many insurers have now accelerated their AI agendas, according to Deloitte.

AI Adoption Rates Among Insurers

• AI use across UK financial firms rose from 58% in the 2022 survey, when a further 14% were planning to adopt it.
• A further 10% of firms plan to use AI over the next three years.
• General insurance is third among business areas with 10% of use cases.
• Operations and IT is the largest area with around 22% of all reported use cases, twice the proportion of retail banking at 11%.
• US insurer data sits in our AI in insurance industry statistics.

Which insurance companies are currently using AI?

Named deployments span fraud, underwriting, and claims. Zurich deployed AI technologies to spot claims fraud, and AIG launched a gen AI-powered underwriting assistant with Anthropic and Palantir, per Deloitte. At Lemonade, expanded AI-assisted workflows and higher instant claim rates in Pet and Renters sit behind its claims cost figures.

Generative AI Adoption in European Insurance

• Nearly two-thirds of undertakings are already actively using Gen AI, based on EIOPA’s Gen AI survey.
• More than half of respondents cited enhancing the customer experience and improving decision-making as key drivers, alongside efficiency and cost cutting.
• Hallucinations, or inaccurate outputs, were the top-cited risk, followed by cybersecurity risks and data protection issues.
• Autonomous Agentic AI applications are expected to have a greater impact on customer-facing uses over the medium term.

Source: EIOPA Generative AI survey, February 2026

Key finding: EIOPA’s survey shows European insurers adopting Gen AI widely but carefully. The majority of reported use cases target back-end productivity tools such as data extraction from invoices, content generation, and coding and underwriting assistants, and dedicated AI policies reached 49% of undertakings, up from only a quarter in 2023.

AI Use Among US Health Insurers

• Nearly 92% of surveyed U.S. health insurers have AI/ML governance principles in place that model NAIC AI Principles.
• Only about 4% of health insurers are using AI/ML to detect smoking.
• Health insurers report using AI/ML for testing model drift and bias, cross-validating for accuracy, and analyzing data for completeness and consistency.
• They also report leveraging AI/ML to conduct equity and compliance audits, with human oversight integrated into AI-driven decision-making.

Digital Insurance Sales and Customer Experience

• Overall satisfaction among shoppers using a virtual assistant or chatbot on an insurer’s website is 645, which is 132 points higher than when chatbots are not used.
• Just one-third of insurance shoppers encounter comparison pricing tools that include other insurance brands.
• Customers are nearly two times as likely to consider purchasing a policy when price comparisons are provided.
• The study is based on 11,553 evaluations and was fielded from January through March 2026.

Source: JD Power, 2026 U.S. Insurance Digital Experience Study

JD Power’s release of the study states that nearly half (47%) of new auto and home policies are now purchased digitally. Set against 11% chatbot use, carriers have taken automation further in the back office than customers have taken up chatbots. Most EIOPA-reported Gen AI use cases target back-end tools, and Lemonade’s LAE ratio has fallen. Line-level pricing and policy counts sit in our US auto insurance industry data.

Insurer Digital Experience Rankings

• The average overall satisfaction score in the shopping segment is 523, which is 12 points lower than last year.
• Amica ranks highest in the service segment with a score of 730.
• National General ranks highest in the shopping segment with a score of 553.

Claims Automation and Expense Ratio Statistics

• The LAE ratio measures the percentage of premiums an insurer spends on claims handling.
• At Lemonade, the LAE ratio had improved to 13% by the time IFP surpassed $1 billion.
• Industry-average LAE ratios are approximately 9%, meaning incumbents are spending almost twice as much of their customers’ premiums on handling claims.
• Lemonade said it could roughly halve the ratio again alongside the next doubling of IFP, and that it is ahead of schedule.
• Advances in AI and automation across the claims operation let Lemonade absorb substantial growth with minimal incremental claims handling expense.

Source: Lemonade Shareholder Letter, Q2 2026

By the numbers: Lemonade’s letter puts its LAE ratio at a record low 5% as IFP reached $1.43 billion, against industry-average LAE ratios of approximately 9%. A digital-native carrier is spending a little over half of what a typical insurer spends on claims handling per premium dollar, and claims automation is where that gap opens first.

More carrier-level claims data sits in our AI in insurance claims statistics.

Digital-Native Insurer Growth Statistics

• Lemonade’s customer count increased by 23% to 3,308,666.
• Premium per customer was $433 at the end of the second quarter, up 8%.
• At Root, partnership and independent agent channels represented approximately 51% of new writings, up from approximately 44% in the prior-year period.
• Root’s net underwriting margin improved 3.1 points year-over-year to 7.9%, equivalent to a 92.1% net combined ratio, while its net expense ratio improved 3.0 points to 26.1%.
• Root’s shift toward partner channels mirrors the distribution trend in embedded insurance statistics.

Source: Lemonade and Root shareholder letters, Q2 2026

The two digital carriers lean on different levers: Lemonade on customer growth and automation, Root on partner channels. Lemonade’s product-line detail is tracked in our Lemonade insurance statistics.

Insurance Core System Cloud Modernization

• Guidewire’s total revenue for fiscal year 2026 was $1,475.4 million, an increase of 23%, per its fiscal 2026 results release.
• Guidewire delivered growth rates of 19% for ARR and 22% for fully ramped ARR, with cash flow from operations margin of 26%.
• Guidewire CFO Jeff Cooper said, “Strong execution in fiscal year 2026 was visible in record sales activity and in the lowest ARR gross attrition rate since we started measuring ARR.”
• Guidewire is issuing an outlook for fiscal year 2027 of ending ARR between $1,450 million and $1,460 million.
• Guidewire cites 1700+ successful implementation projects.

Source: Guidewire Fourth Quarter and Fiscal Year 2026 Results

Worth noting: Guidewire’s license revenue was $234.6 million, a decrease of 7%, while subscription and support revenue rose 33%. That split is a proxy rather than a census: it describes one vendor’s customer base moving core policy, billing and claims systems from licensed software to cloud subscriptions, not the whole industry.

AI Fraud Detection and Workforce Readiness

• Zurich uses machine learning to detect anomalies in filed claims.
• AIG’s underwriting assistant ingests and prioritizes every new excess and surplus submission.
• Most insurance leaders are now focused on practical AI use cases, with clear return on investment and manageable risk.

Source: Deloitte 2026 Global Insurance Outlook

Is AI going to replace insurance jobs?

No source here measures job losses, and the available data shows AI adding review capacity. AIG’s assistant allows review of additional policies without adding new staff, and EIOPA found insurers maintaining strong human oversight. Skills are the pressure point: Deloitte’s 90% versus 25% gap shows executives see the need well ahead of acting on it.

What Is the Biggest Challenge Facing the Insurance Industry?

For AI adoption, EIOPA’s survey puts the main hurdles at privacy, compliance, and skills rather than appetite for the technology. EIOPA respondents identified data privacy and security concerns, potential issues with regulatory compliance and the lack of sufficiently skilled staff as the main hurdles to implementing Gen AI systems. Insurers also rely heavily on third-party providers, opting to purchase off-the-shelf solutions or build on top of pre-trained models.

Those hurdles explain the adoption-versus-scale gap. An insurer can pilot a vendor model, but putting it into claims or pricing means clearing privacy, compliance, and staffing constraints first.

Conclusion

Global InsurTech funding reached $2.44 billion in the latest quarter, with 99.1% going to AI-focused companies, and supervisors’ surveys find the technology already inside most of the firms they polled, led by the insurance sector’s 95% AI use in the UK. Our read of the data is that the capital and the internal adoption are ahead of the customer: back-office automation is moving costs, as Lemonade’s LAE ratio shows, while shoppers still barely touch the chatbots built for them.

The next measurement to watch is how many of today’s proof-of-concept projects reach production.