The insurance industry is bringing AI into its operations, but the challenge now is scaling it

The insurance industry is rapidly integrating artificial intelligence (AI) into its core operations, from underwriting and risk assessment to claims management and customer service. This change is taking place in an industry that manages massive amounts of data but also faces stringent regulation, complex compliance requirements, and protracted processes.

According to a Deloitte survey of 200 U.S. insurance executives, 76% have already integrated generative AI into at least one business function. However, scaling this AI adoption remains a significant challenge. The Deloitte survey also highlighted economic pressures and a slowdown in the global insurance market as factors impeding this transition.

Venture capital investments in the sector have declined, with insurance startups raising less than a quarter of the funding they did at their peak in 2021. Nevertheless, AI and automation continue to play pivotal roles in significant funding rounds, particularly in underwriting, claims processing, and risk assessment. The industry is shifting from experimental use of AI to the challenge of scaling its implementation.

This transition is also altering the types of companies receiving capital. Recent funding rounds in the insurtech ecosystem are increasingly focused on infrastructure and workflows rather than consumer-facing models. The complexity of insurance operations, involving various systems, regulatory requirements, and human decisions, demands a different approach to AI integration.

Companies must build scalable workflows before expanding rapidly, ensuring that adding new customers, states, insurers, and revenue streams does not become prohibitively costly. Get Covered, a company at the intersection of insurance, risk management, and compliance for property managers in the U.S. rental market, exemplifies this shift.

COO Rick Folgmann emphasizes that growth without discipline in insurtech is not momentum but risk. Get Covered advocates for building repeatable and scalable workflows early, integrating compliance into operational infrastructure rather than treating it as a separate function. This approach addresses the challenge of making automation work within the insurance environment's regulatory and operational complexities.

The industry's focus is shifting from merely automating specific tasks to integrating AI into operations that must manage regulation, data, risk, and service. As the market for insurtech funding remains subdued compared to its 2021 peak, the next stage for insurers and startups may hinge more on establishing consistent conditions for AI to operate effectively.

In an industry fundamentally about managing risk, scaling technology without compromising operational integrity is paramount.