Private equity buyers and their insurer clients are increasingly treating artificial intelligence as the primary yardstick when evaluating insurtech targets, according to industry advisers and recent funding data.
AI dominates funding and deal focus
Research cited in an industry report shows a near-total concentration of early‑stage investment in AI-focused insurtech firms. In the first quarter of 2026, 95.2% of global insurtech funding went to companies pitching AI capabilities, underlining a rapid shift in what acquirers prize.
Where five years ago acquirers prioritised migrating software to cloud infrastructure, today the core question in due diligence is how artificial intelligence will make a company’s product faster, more accurate or more scalable after purchase. That change affects both private equity strategists and insurers licensing third‑party platforms, because the technology roadmaps set at acquisition become the default direction for those products in market.
Which parts of the stack attract value
Insurtech offerings that typically attract the most value still cluster around fundamental policy administration functions: policy administration, billing and rating. Point solutions — for example, claims fraud detection or distribution platforms used by managing general agents (MGAs) and marketplaces — remain attractive primarily when they offer access to new customers or distribution channels.
But across these categories, the presence of AI is no longer a differentiator by itself. Advisers say buyers are parsing AI into specific roles and demanding evidence of real‑world impact rather than marketing claims.
Buyers are looking for three types of AI
Industry practitioners separate AI functionality into three practical types and test each during due diligence:
- Predictive AI – used mainly in underwriting and pricing to estimate loss likelihoods and expected outcomes;
- Generative AI – employed for creating, summarising and structuring written material;
- Agentic AI – a newer category that vendors are heavily promoting, which aims to perform tasks autonomously on behalf of users.
Buyers want evidence that these technologies are integrated into workflows and deliver measurable benefits such as improved underwriting accuracy, reduced claims leakage or meaningful efficiency gains in customer service.
"What are (insurtech’s) doing today with AI, and how am I going to make them faster, smarter, better using AI going forward?"
The line above summarises the mindset private equity and strategic buyers bring to insurtech transactions. Due diligence now probes not only the existence of AI, but how it has been developed, validated and deployed at scale.
Consequences for the market and buyers
The shift to AI has practical consequences for both vendors and purchasers. Vendors must demonstrate traction, demand growth and proof points that go beyond lab‑style demonstrations. Buyers and insurers, meanwhile, need to understand what kind of AI they are buying, what level of ongoing investment will be required and whether promised gains are sustainable.
| Metric | Reported figure |
|---|---|
| Share of Q1 2026 insurtech funding to AI firms | 95.2% |
That concentration of capital into AI raises follow‑on questions about market concentration and the fate of non‑AI or legacy cloud migration plays. If funding continues to cluster around AI, vendors without credible AI roadmaps may struggle to attract buyers or licensing partners.
For UK insurers and technology teams, the message is clear: during sourcing and procurement, treat AI as a set of capabilities to be validated, not a checkbox to be ticked. Successful acquirers will separate demonstrable engineering and product traction from vendor rhetoric and structure deals around measurable outcomes rather than promising technology narratives.
As funding flows and acquisition criteria evolve, the insurers that remain rigorous about proof and integration will be best placed to benefit from AI’s potential to reshape underwriting, pricing and claims handling — but only if the technology is proven, well governed and tightly aligned to commercial objectives.
