Although Silicon Valley entrepreneurs detest dull audiences, they might have to induce more yawns if they hope to revolutionize the insurance industry.

Though the stock market is still driven by enthusiasm for artificial intelligence, businesses devoted to “insurtech,” or the revolution of insurance through technology, are not benefiting from this enthusiasm. Stocks in publicly traded companies including Hippo, Root, and Lemonade have been fluctuating in value.

According to new data released by reinsurance broker Gallagher Re, global insurtech funding dropped to $4.5 billion in 2023—a 44% decline from the year before. The industry is recovering from the free-money frenzy of 2021, but last year’s involvement in megadeals was at its lowest level since 2017.

Innovation is necessary in insurance. Natural disasters are driving up insurance costs and displacing coverage for households. Personal auto insurance has grown unaffordable as underwriters continue to lose money. A few minor insurance lines are still considered secondary. Though Californian entrepreneurs revolutionized the industry nearly ten years ago, few of these problems have been resolved.

In actuality, the majority of insurance success stories exist before the current surge in venture funding. One notable exception is the Texas-based broker Goosehead Insurance, which was created in 2003 and prioritizes agents. Since going public in 2018, the company’s stock value has increased tenfold. Parsyl, a Lloyd’s of London syndicate that specializes in insuring for perishable marine cargo, is arguably a better example. Venture investors like HSCM Ventures and GLP Capital Partners support this data-driven company. They have maintained a strong underwriting record while allowing it to grow gradually.

Venture capitalists typically seek rapid rates of expansion. Consider the promising company Koffie Financial, which aimed to disrupt the truck insurance market, where established competitors had cut back on coverage. Following the withdrawal of an inside investor’s pledge to provide a bridge loan, the company is now terminating the majority of its staff.

“We shall only undertake prudent underwriting. Sadly, investors don’t care about that; they claimed the increase wasn’t strong enough, according to Koffie CEO Ian White.

The conundrum with insurtech is this: Consumer-centric, tech-inspired buzzy optimism doesn’t work well in an industry where attempts to grow quickly and appeal to cool customers backfire because it attracts the riskiest clients. Proprietors like Allstate, Prudential, and AXA possess significantly more data to accurately assess risk, counterbalancing the benefits that digital technology and artificial intelligence were meant to bestow upon entrants.

There is good news to report. Traditional insurers have been forced to go online, make telematics investments, and begin examining artificial intelligence (AI) by this initial wave of insurtech entrepreneurs. Many of them were not even able to issue digital policies until recently.

These days, Silicon Valley is concentrating on fewer projects. It should cease supporting ostentatious competitors that claim to guarantee greater use of technology and focus on the technology itself in order to make a more lasting impression.

The California-based Cyberwrite and the Spanish insurance MAPFRE partnered in November to deliver more precise data on a company’s susceptibility to cyberattacks through artificial intelligence. It is used by startups like Charlee.ai to identify fraud and scan claims. There is also a lot of competition to produce more accurate predictions of climate risk.

Next up is Sure, a $550 million business that wants to function as a one-stop shop for IT. Actuarial models, back-end technologies for speedy quote generation and claim processing, agent software, chatbots for customer support, and direct distribution channels including websites and mobile applications are some of the services it offers. While leaving the underwriting risk to businesses that have the required data—carmakers, real estate marketplaces, and rental platforms looking to introduce their own “embedded” insurance lines—it seeks to mimic the slickness and speed of insurtech startups like Lemonade.

Sure unveiled a new solution on Wednesday that pre-integrates new rules with the technology to be distributed digitally and automates the legal paperwork required to introduce new policies.

Introduced new insurance products frequently take longer than a year to market. Easy customization of policy templates will speed up the process and improve the outcomes’ ability to correct coverage gaps based on individual needs. AI has the ability to go one step further in enabling insurers to understand the impact of particular policy language on claims payments, according to William Mauro, head of coverage for commercial lines at data supplier Verisk Analytics.

This kind of menial labor is ready for dislocation. Overexcitement in the insurance industry is never a good thing.