Insurance 3.0: The Future of Insurance Powered by AI

By Moha Shah Venture Capital Leader | Future of Mobility, Climate, & Insurtech/Fintech | Strategy, Innovation & Digital Transformation

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All companies and industries have a founding story, and the insurance industry is no different. The modern insurance industry was shaped in the 17th century when sea voyages for trade and exploration were pivotal in global commerce. Edward Lloyd, a coffee shop entrepreneur in London, was regarded as one of the founders of the modern insurance industry. Lloyd’s of London remains central to the insurance market as a global marketplace for insurance and reinsurance. Many legacy insurance firms were founded between the 19th and 20th centuries. In the U.S., Chubb was founded in 1882, Liberty Mutual in 1912, and Progressive in 1937. In Europe, Allianz launched in 1890 in Germany, Generali in 1831 in Italy, and AXA in 1816 in France.

The global property-and-casualty (P&C) market was nearly $4T in 2023 and is projected to grow to over $8T by 2032, according to Precedence Research. While insurance isn’t a physical product, it’s a legally binding contract that protects policyholders from unforeseen events such as business interruption, cyber attacks, auto collisions, or property damage. 

In the U.S. market, buying insurance is required for driving your car and for securing your mortgage on your home. Within commercial insurance, companies from startups to large corporations need insurance to operate across different industries. For board service in public and private companies, Directors and Officers (D&O) insurance is essential — it protects leaders from personal liability when making decisions on behalf of a company.

Increasingly, insurance offers innovative companies the opportunity to operate new products and services commercially – think of the autonomous vehicles (AVs) on the roads to drones in the skies. Despite the insurance industry’s storied history, it’s at an inflection point due to an increasingly digital-first customer base, climate change, and emerging technologies, including artificial intelligence (AI).  

From Legacy to Embracing Digital Transformation

Digital transformation is reshaping the insurance industry, which has historically operated with legacy technology, manual processes, and highly skilled professionals across different lines of business. Many incumbents have embraced waves of digital transformation over the past few decades to serve an increasingly digital-first customer segment, particularly Millennials and Gen Z. The rise of insurance technology (insurtech) startups in the mid-2010s, such as Lemonade, Openly, Policygenius, and Root, also sparked innovation initiatives at many legacy insurance companies.

While insurance companies have adopted different digital transformation strategies, they’ve also turned to insurtechs for partnerships, co-developing products and services, and other strategic initiatives. More climate-driven events across the U.S. and abroad are also prompting incumbents to partner with insurtechs to develop more resilient products and services for their policyholders. In doing so, many parts of the insurance value chain are being transformed to drive operational efficiencies, underwrite more complex risks, and offer a more personalized customer experience.

Innovations Amid Climate Change

Photo by Caleb Cook on Unsplash

Climate change has emerged as a critical issue among the industry’s leaders. Communities worldwide are facing more frequent and severe weather events, from wildfires to hurricanes. In 2024, global insured losses due to natural catastrophes topped nearly $140B according to Swiss Re Institute.

In January 2025, the wildfires in the Los Angeles metro area cast a spotlight on the insurance market as homeowners and businesses faced staggering losses across their communities. Goldman Sachs projects $30B in total insured losses from the LA wildfires. A recent National Public Radio article offers additional insights into the property insurance market in states such as California and Florida, which are experiencing increasing climate-driven events.

The insurance ecosystem – insurance companies, insurtechs, government regulators, and third parties – is collaborating in novel ways. Increasingly, new products and services are being developed with emerging technologies, including AI. As telematics, blockchain, satellite imagery, drones, and Gen AI drive innovations across the insurance value chain, we are entering into a new era – Insurance 3.0.

AI: Driving Resilience and Insurance 3.0

Photo by Louis Cook on Unsplash

I have launched new digital products and services at a global P&C insurance company – many focused on climate resilience – and have worked with numerous startups leveraging AI and other emerging technologies. Through these experiences, I have learned that stakeholders across the insurance ecosystem are willing to adapt and drive innovation forward for their customers.

Despite having different strategic goals, insurance incumbents share a growing commitment to modernizing their IT stacks to tackle increasingly frequent climate-driven events and serve a digital-first customer base.

Emerging technologies from Generative AI (Gen AI) to aerial imagery captured by drones or satellites are accelerating innovation across the insurance value chain.

With AI’s rise, many U.S. states and jurisdictions abroad are passing legislation to ensure responsible AI practices. In the U.S., the Colorado Anti-Discrimination in AI Law was signed on May 17, 2024, to protect consumers from algorithmic discrimination in different areas such as legal services, housing, and insurance. The European Union AI Act (AI Act) was published in the Official Journal of the European Union on July 12, 2024. The AI Act regulates the use of AI in the European Union through a four-level, risk-based classification system.

Beyond the evolving regulatory landscape for AI, both established insurance companies and insurtechs are transforming core functions including claims, compliance, customer service, legal, and underwriting.

AI-First Insurtechs Transforming Insurance

Many AI-first insurtechs are working to automate antiquated workflows across core functions. For example, insurance underwriters often spend hours to days manually collecting data from different sources such as Excel spreadsheets, PDFs, and emails.

AI-powered solutions can rapidly ingest and analyze large volumes of unstructured data to streamline underwriters’ workflows.

Insurtechs such as Sixfold and FurtherAI are leveraging Gen AI-powered platforms to support underwriters’ workflows and enable insurers to serve their customers with greater efficiency and accuracy.

 Below are additional innovative insurtechs leveraging AI and other emerging technologies across different lines of business. Many of these insurtechs also have strategic partnerships with leading insurance companies and partners.

• Adaptive Insurance, an Austin-based startup founded in 2024, offers parametric insurance to businesses impacted by short-term power outages caused by weather events.

• DocLens.ai, founded in 2022 in New York, has developed a Gen AI-powered risk assistant to streamline workflows for legal and claims teams.

• Comply, founded in New York, aims to help compliance teams navigate the evolving regulatory landscape via its AI-driven platform.

• Delos, founded in 2017 in San Francisco, leverages AI, aerial imagery, and other proprietary data sets to protect and insure homeowners in wildfire-prone states like California.

• Insurwave, founded in 2018 in London, is an AI-driven platform to ingest, manage, and visualize complex data across specialty lines.

  
  

Additionally, many insurtechs are increasingly led by experienced insurance professionals. Their industry expertise is enabling AI-first startups to not only build innovative products and services but also foster greater collaboration with insurance companies and ecosystem partners as they scale. 

Insurance 3.0: The Path Forward

As a new AI-powered era unfolds, more innovation is on the rise across the insurance industry. Collaboration among legacy insurers, insurtechs, government agencies, and other partners is leading to a more connected and tech-enabled ecosystem. This collaboration remains essential to drive more innovation and develop more resilient products and services to protect people, businesses, and communities worldwide.