Insurtech Startups Face Squeeze as Major Insurers Build In-House AI

Major insurance carriers including Aviva, Chubb, and MetLife are increasingly developing their own artificial intelligence capabilities in-house, creating a competitive squeeze for insurtech startups. According to a report from CB Insights, this shift is forcing startups to demonstrate clear commercial value as the industry moves from AI experimentation to practical implementation. The trend is accompanied by a tightening investment landscape where venture capital is favoring mature companies over early-stage entrants.

Major global insurers such as Aviva, Chubb, and MetLife are shifting away from external reliance by building internal artificial intelligence capabilities, a move that places significant pressure on the insurtech ecosystem. As AI transitions from a testing phase to practical, everyday use, insurers risk falling behind in 2026 if they do not successfully integrate these technologies. Consequently, insurtech startups are now under intense scrutiny to prove they can deliver tangible commercial value to their partners rather than just providing experimental tools.

The investment climate for the sector has become increasingly selective, with CB Insights reporting that the number of investors making four or more insurtech investments dropped to its lowest level since 2017 during 2025. Current investment activity is heavily skewed toward mature companies that demonstrate robust growth signals. This shift is particularly evident in the hiring patterns of agentic AI-focused insurtechs; seven of the top nine companies in this niche are currently recruiting for implementation-focused roles to help insurers and intermediaries move AI tools beyond the pilot stage and into active production.

Data highlights a stark contrast between insurtech and the broader venture capital market regarding early-stage funding. In Silicon Valley, only 18% of insurtech deals with commercial maturity data were directed at early-stage companies in 2025, compared to 51% in the wider venture market, while in New York, that figure dropped to 13%. Furthermore, while median early-stage deal sizes in the general venture market rose by 50% year-on-year, the median deal size for early-stage insurtechs actually declined between 2024 and 2025, signaling a challenging environment for new market entrants.