Gallagher Re Analyzes How AI Is Transforming Commercial Insurance

Gallagher Re has released its Global InsurTech Report—Q3 Commercial Insurance, which examines InsurTech funding trends, the role of artificial intelligence (AI) in commercial insurance, and the performance of technology-driven solutions during the latest quarter. The report outlines investment patterns, the evolution of AI-enabled underwriting and distribution, and market activity across commercial lines.

Global InsurTech funding totaled $1.01 billion in the third quarter of 2025, reflecting a steady trend seen over the past 3 years, according to Gallagher Re. The report notes that this quarterly total falls within 10 percent of the 3-year mean average of $1.1 billion, despite a 7.9 percent quarter-over-quarter decline.

Deal activity slowed significantly, with just 76 transactions recorded—the lowest count since the second quarter of 2020, per the report. Average deal size rose to $15.70 million, driven by fewer overall deals and increased concentrations of funding among property-casualty InsurTechs.

Funding trends diverged across business lines. Life and health InsurTech funding declined 56.8 percent quarter over quarter to $314.75 million, while property and casualty InsurTechs saw funding increase 90.5 percent to $690.28 million, according to the report. Commercial-focused InsurTechs raised $470.67 million across 37 deals in the third quarter of 2025.

AI-centered InsurTech activity remained dominant. Gallagher Re said that 74.8 percent of all third quarter funding—approximately $751.72 million—went to AI-focused companies. Early-stage AI InsurTechs accounted for 29 of the 49 AI-related deals in the quarter.

The number of active InsurTech investors decreased to 186, the lowest level since 2017, per the report. However, (re)insurers set a new record with 51 tech-backed investments in the quarter, led by MS&AD Holdings, followed by MassMutual Ventures and The Blue Venture Fund.

The report underscores the expanding application of AI across commercial insurance. According to Gallagher Re, automation, data entry and classification, and large language models ranked as the three most impactful technologies for commercial lines. These tools are being applied in underwriting, risk triage, fraud detection, claims processing, and workflow automation.

AI adoption is reshaping underwriting practices, with InsurTech platforms supporting underwriters by extracting data from submissions, identifying portfolio patterns, and assisting with initial risk assessment, per the report. Gallagher Re notes that workflow-enhancing AI is especially relevant for commercial underwriting, where human judgment remains essential.

The report emphasizes that commercial insurance's complexity—including long-tail exposures, variable product structures, and limited public data—makes full automation unlikely. According to Gallagher Re, technology instead functions as a decision-support tool, reducing manual tasks and enabling underwriters to focus on complex risks and client relationships.

New and emerging risks continue to create opportunities for InsurTechs. The report highlights growing interest in AI liability insurance, as companies seek protection from damages caused by AI-related outputs such as data errors, intellectual property infringement, or algorithmic bias. Investors have also shown increased funding for cyber, gig-economy products, and infrastructure enabling small business coverage.

Claims-related AI applications continue to advance. According to the report, insurers are using natural language processing to review medical reports, computer vision to assess property or auto damage, and machine learning to detect anomalies indicative of fraud. These capabilities are especially impactful in commercial lines given claim complexity.

Since 2012, almost $9.8 billion has been invested in commercial-related InsurTechs out of roughly $61 billion of total global InsurTech investment, per Gallagher Re. The United States continues to lead the market with 146 active commercial-focused InsurTechs and 298 deals to date.

The report also includes case studies on companies such as Boost Insurance, Bowhead Specialty, Redkik, and Gallagher Bassett, reviewing how AI is being deployed to streamline distribution, enhance underwriting, and improve claims decision-making. These examples illustrate the broader shift toward AI-enabled efficiency across the commercial insurance value chain, according to the report.

Looking ahead, Gallagher Re outlines possible AI developments including continuously updated underwriting files, augmented decision-making for brokers and underwriters, and greater emphasis on predictive loss prevention services. These developments reflect the long-term trend toward combining human expertise with AI-assisted analysis.