The insurance industry is vast, with the U.S. market alone valued at nearly $2 trillion and projected to grow to $3.71 trillion by 2033.
Despite its size, the industry is undergoing significant change, driven by both external pressures and internal inefficiencies. Legacy systems, still relied on by 74% of insurers, hinder the ability to adapt to new challenges such as the increasing frequency of natural disasters.
Traditional insurers and their legacy insurance offerings are retreating from high-risk markets. Like State Farm dropping 72,000 California home policies in 2024.
This creates a clear opportunity for startups to step in with innovative solutions. Venture capitalists recognize the potential, investing $4.2 billion in insurance startups last year alone.
For entrepreneurs ready to modernize an outdated system, insurance startups offer a chance to revolutionize an industry ripe for disruption. This post is for you.
What is an insurance startup?
An insurance startup is a new company that aims to disrupt or innovate within the insurance industry. These startups leverage advanced technologies, unique business models, and customer-centric approaches to address inefficiencies and gaps in traditional insurance. They often focus on enhancing processes or introducing new products. Insurance startups typically target specific pain points, such as slow claims processing, high costs, or lack of personalization, to provide faster, more affordable, and more user-friendly solutions.
How does insurtech fit in?
Insurtech, short for insurance technology, refers to the application of modern technologies—like AI, blockchain, IoT, and machine learning—to the insurance industry. Insurtech startups play a pivotal role in driving innovation by enabling automation, improving data-driven decision-making, and creating tailored customer experiences.
The types of insurance startups have been entering
Insurance startups are diversifying across multiple categories, addressing various customer needs with innovative solutions. Common categories include:
Home insurance
Health insurance
Business insurance
Car insurance
Life insurance
Cyber insurance
Startup business insurance
Pet insurance
Are there any insurance categories ripe for new players?
Yes, several insurance categories are ripe for innovation.
Cyber insurance for small businesses remains underserved, despite rising cyber threats.
Parametric insurance for climate events, like floods or wildfires, offers instant payouts and could grow significantly.
Gig economy insurance for freelancers and independent contractors presents untapped potential, as flexible and affordable coverage options are in high demand.
Startup insurance for addressing the unique risks associated with investing in startups.
At the end of the day, insurance is there to support us when things go wrong—be it nature, accident, or malicious events. As our society and environment keep rapidly changing, new opportunities will continue to arise.
How are insurance startups disrupting the insurance industry?
Here are some of the main ways the industry is being disrupted right now.
Usage-based insurance: Offering coverage based on real-time data, such as mileage-driven for auto insurance or health metrics for life insurance.
On-demand insurance: Allowing customers to activate and deactivate coverage as needed, often via mobile apps.
Embedded insurance: Seamlessly integrating insurance products into other services or products, like travel insurance offered during a flight booking.
AI-driven underwriting: Using artificial intelligence to automate and improve the accuracy of risk assessment and premium calculation.
Microinsurance: Providing affordable and easily accessible insurance for low-income populations or specific needs, such as crop insurance for farmers.
Parametric insurance: Offering payouts triggered by predefined events (e.g., a natural disaster or flight delay) rather than traditional claims processes.
Digital-first experiences: Creating intuitive, customer-centric interfaces for managing policies, claims, and payments entirely online.
Data-driven personalization: Leveraging big data to offer highly customized insurance products and recommendations.
Telematics for auto insurance: Using GPS and vehicle tracking to monitor driving behavior and adjust premiums accordingly.
Insurance-as-a-service platforms: Providing APIs that allow other companies to embed insurance offerings into their own products seamlessly.
10 great insurance startups to watch
1. Stream
Year established: 2022
Location: San Francisco, California, USA
Funds raised: $5.3 million
Stream is transforming workers' compensation by automating the processing of billions of medical documents. Founded by industry veterans, Stream reduces costs, shortens timelines, and improves outcomes for all stakeholders in the claims process.
How they are disrupting the industry:
Automating medical document processing to reduce errors and time.
Improving communication and transparency for injured workers.
Lowering litigation rates by streamlining claims resolutions.
Enhancing adjuster efficiency through reduced manual work.
Reducing overall claim costs for insurers.
2. TrustLayer
Year established: 2018
Location: Brendon, Florida, USA
Funds raised: $22 million
Built for modern risk managers, TrustLayer transforms third-party risk management with an AI-powered compliance automation platform. Processing over 400,000 Certificates of Insurance (COIs) monthly, the platform simplifies compliance, improves vendor communication, and provides actionable insights to manage risk effectively and efficiently.
How they are disrupting the industry:
Automating insurance compliance with AI to improve efficiency and accuracy.
Offering seamless vendor onboarding and COI tracking with real-time risk insights.
Providing a collaborative platform with no sign-in required for vendors and brokers.
Leveraging a network of nearly 300,000 companies for smarter risk management.
Turning risk management into a strategic advantage for businesses.
3. Federato Technologies
Year established: 2020
Location: Palo Alto, California, USA
Funds raised: $80 million
Federato Technologies is transforming underwriting with its RiskOps platform, the first of its kind for property and casualty (P&C) and specialty insurance. By combining AI and reinforcement learning, Federato optimizes risk portfolios in real-time, bridging the art and science of underwriting. Its innovative approach empowers underwriters to achieve strategic growth while managing risk effectively.
How they are disrupting the industry:
Introducing the industry-first RiskOps platform for real-time risk and portfolio optimization.
Leveraging AI and reinforcement learning to align underwriting actions with portfolio strategy.
Providing a federated data graph for a unified view of client information and proactive AI recommendations.
Enhancing efficiency and growth by enabling underwriters to triage risks based on appetite and guidelines.
Serving a wide range of customers, from multi-billion-dollar carriers to high-growth MGAs, to meet evolving industry needs.
4. Owl.co
Year established: 2018
Location: Vancouver, Canada
Funds raised: $47 million
Owl.co leverages AI-powered technology to transform insurance processes, specializing in claims management and fraud detection. The platform uses secure, end-to-end encrypted tools to enhance data collection, automate document processing, and ensure ethical, accurate evaluations for insurers and claimants alike.
How they are disrupting the industry:
Identifying five times more fraudulent cases compared to traditional solutions.
Automating claims and document processing for faster, more accurate decisions.
Prioritizing compliance and fairness by eliminating biases in fraud detection.
Offering customizable workflows to suit diverse insurance team needs.
Integrating insights from over 120 billion public data sources to enrich claims.
5. Angle Health
Year established: 2019
Location: San Francisco, California, USA
Funds raised: 58 million
Designed to modernize employer-sponsored healthcare, this AI-enabled platform simplifies benefits for employers, brokers, and members. With a focus on transparency and whole-person care, Angle Health delivers unlimited access to professionals, streamlined management tools, and reduced costs for all stakeholders.
How they are disrupting the industry:
Providing an AI-enabled health platform that streamlines benefits management for employers and brokers.
Offering unlimited access to healthcare professionals for members, promoting a whole-person care approach.
Reducing complexity and costs through a modern, tech-enabled solution.
Replacing legacy systems with innovative tools designed for transparency and simplicity.
Empowering stakeholders with an empathetic and user-centric healthcare experience.
6. Gradient AI
Year established: 2018
Location: Boston, Massachusetts, USA
Funds raised: $56.1 million
Gradient AI delivers advanced artificial intelligence solutions to transform underwriting and claims processes for the insurance industry. By leveraging a vast industry data lake with millions of policies and claims, Gradient AI enhances risk prediction, improves loss ratios, and automates decision-making for insurers across major lines of insurance.
How they are disrupting the industry:
Utilizing a vast industry data lake to predict underwriting and claims risks with precision.
Enhancing profitability for insurers by improving loss ratios and reducing claim expenses.
Accelerating quote turnaround times with intelligent automation.
Providing insurers access to enriched datasets, including economic, health, and geographic information.
Supporting diverse customers, including carriers, MGAs, TPAs, and self-insured employers.
7. Dayforward
Year established: 2020
Location: New York, USA
Funds raised: $25 million
Focused on redefining life insurance, Dayforward offers a digital-first platform that simplifies the process of securing term life insurance. By using a seamless online application, it provides instant coverage designed to replace a policyholder's income, ensuring families are financially protected in the event of a loss.
How they are disrupting the industry:
Offering instant life insurance coverage through a streamlined digital application.
Designing policies to replace income, ensuring family financial stability.
Simplifying complex insurance processes with user-friendly technology.
Eliminating the need for lengthy paperwork and in-person meetings.
Making term life insurance accessible and affordable for all families.
8. Tint
Year established: 2018
Location: San Francisco, California, USA
Funds raised: $25 million
Tint enables businesses to embed insurance and assurance products seamlessly into their platforms, transforming insurance from a standalone product into a natural extension of the customer experience. With white-labeled solutions, Tint helps brands create tailored coverage for intrinsic risks, boosting trust, conversions, and profitability.
How they are disrupting the industry:
Providing white-labeled, embedded insurance that integrates seamlessly into a brand’s user experience.
Delivering tailored, compliant insurance solutions that align with platform needs.
Increasing revenue opportunities by streamlining insurance operations and reducing overhead.
Enhancing customer trust with relevant and intrinsic risk protection.
Partnering with capacity providers to create bespoke and scalable embedded insurance solutions.
9. Stand
Year established: 2024
Location: San Francisco, California, USA
Funds raised: $30 million
Stand Insurance reimagines homeowners insurance for climate-impacted properties by combining tailored coverage with innovative risk mitigation strategies. Leveraging advanced AI modeling and physics, Stand fortifies homes against risks like wildfire, flood, and wind. By addressing the insurance gap in high-risk areas, Stand offers resilient solutions where traditional insurers have pulled back.
How they are disrupting the industry:
Insuring climate-impacted properties with tailored plans that integrate risk reduction and coverage.
Utilizing advanced AI and physics-based modeling to create “digital twins” of homes for precise risk simulation.
Providing actionable risk mitigation plans for homeowners, such as landscape modifications and structural improvements.
Expanding coverage to underserved high-risk areas, addressing a significant gap in the market.
Combining interdisciplinary expertise in science, insurance, and wildfire risk to tackle climate challenges.
10. Ascend
Year established: 2021
Location: San Francisco, California, USA
Funds raised: $5.6 billion
This startup is revolutionizing insurance payments with its automated, all-in-one financing, collections, and payables platform. Ascend modernizes insurance financial infrastructure, enabling distributors to focus on growth by eliminating costly manual processes while providing customers with seamless online checkout and financing options.
How they are disrupting the industry:
Offering the first purpose-built payments solution for the insurance industry.
Streamlining financing, collections, and payables into an automated, all-in-one platform.
Helping distributors increase sales by reducing labor-intensive, manual tasks.
Providing customers with a modern, seamless online checkout experience.
Laying the foundation for future insurance innovations with scalable financial infrastructure.
3 insurance startup business ideas
As you can see there is a lot going on in the insurance startup world, but there is still room for more. Here are three startup ideas that solve real problems happening now.
1. Parametric Insurance for Climate Change Events
Problem: Climate change has increased the frequency and intensity of extreme weather events, making traditional claims-based insurance inefficient and slow. For example, homeowners in flood-prone areas often face lengthy claims processes and disputes over coverage.
Solution: Develop a parametric insurance platform that triggers instant payouts based on pre-defined criteria like rainfall thresholds, wind speeds, or seismic activity. Using IoT sensors and satellite data, the startup would monitor environmental conditions in real-time and automatically issue payments when a trigger event occurs, eliminating delays and disputes.
2. Pay-Per-Mile Auto Insurance with Smart Dashcams
Problem: Many drivers, especially remote workers and retirees, are overpaying for traditional auto insurance policies that don’t account for their low mileage or safe driving habits.
Solution: Build an auto insurance platform that uses telematics and AI-enabled dashcams to offer pay-per-mile coverage with rewards for safe driving behavior. Drivers pay only for the miles they drive and can earn discounts for smooth braking, adhering to speed limits, and avoiding distractions.
3. AI-Powered Small Business Cyber Insurance
Problem: Small businesses are increasingly targeted by cyberattacks but often lack affordable insurance options tailored to their size and needs. Traditional cyber insurance policies are costly and offer generic coverage that may not address specific risks like phishing or ransomware.
Solution: Create an AI-powered cyber insurance platform that evaluates a business’s risk profile in real-time and offers tailored coverage. The platform would integrate with business software (e.g., email servers, cloud storage) to monitor security practices and dynamically adjust premiums based on risk exposure.
Thinking about starting an insurance SaaS startup?
Launching an insurance startup requires more than just identifying a gap in the market—it demands innovation, regulatory expertise, and a technology-first approach to meet modern customer expectations. If that’s you then great, but focusing on defining your product, refining your business model, and building trust with customers is a lot to take on.
Having a dedicated development team to take care of the technical complexities can be a game changer in the early stages. They can focus on the product, while you put your talents to work.
At DevSquad, we specialize in crafting scalable, high-quality products. From validating your idea to implementing AI-driven solutions and launching your product, our team provide the expertise to bring your product to life.
Are you building an insurance SaaS startup? Learn more about how we work.
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