The insurance claims process is broken. But AI in insurance claims could finally fix it. Claims could be an insurer’s key driver for retention, but instead, poor claims experiences put billions in premiums at risk. Accenture estimates that poor claims experiences could jeopardize $170 billion in global premiums by 2027. The truth is that claims handling is complex and expensive. It requires labor-intensive work: investigating incidents, assessing damages, detecting fraud, managing settlements, and maintaining constant communication with policyholders throughout lengthy processes. This is why insurers are increasingly using Third-Party Administrators (TPAs) to manage claims for them. This is especially common with smaller carriers, MGAs, and those expanding into new lines of business where building in-house capabilities doesn’t make economic sense.
The TPA industry is a $342 billion global market, yet it remains plagued by manual process and outdated technology. In 2023, over 70% of insurance complaints were related to claims handling issues, revealing just how broken the current system has become. This is why we’re excited to announce our investment in ClaimSorted, an AI-first TPA transforming how insurance claims are processed.
The Strategic Advantage: AI Insurance Claims as a Service
Insurtech startups that build software products for insurers often face 8-12 month sales cycles and endless integration challenges. However, while software sales often get stuck in committee decisions and “nice-to-have” discussions, service deals are usually closed in under 6 months.
As Pavel, ClaimSorted’s CEO noted, there are three reasons for this:
- Services often have a single buyer
- There is an immediate measurable output, and
- They tap into existing premium allocations where budget is already earmarked.
Software falls outside these allocations and requires separate budget approvals across multiple stakeholders.
With this in mind, ClaimSorted decided to tackle the insurance not buy selling software, but through a complete TPA offering.
Early traction validates their approach. ClaimSorted has closed multiple clients across specialty lines including pet, cyber, and travel insurance, with market indicators suggesting they’ve reached meaningful revenue milestones. Their six-month average sales cycle significantly outpaces typical insurance software.
Market Timing and Opportunity
Several forces are converging to create exceptional opportunity:
- AI advancement: Large language models can improve claims process efficiency by up to 73%
- Regulatory pressure: New regulations like Consumer Duty are forcing insurers to prioritize customer outcomes
- Economic reality: Rising loss ratios are driving demand for cost-effective, superior service providers
The TPA market remains highly fragmented. Even Sedgwick, the largest player globally, commands only 1% market share. This fragmentation, combined with widespread dissatisfaction with incumbent providers, creates substantial opportunity for disruptive entrants.
Our Investment Thesis: The Future of AI Insurance Claims
ClaimSorted represents the intersection of several compelling investment themes:
AI-Native Operations: Built from the ground up around AI capabilities, not retrofitted onto legacy processes.
Massive Underserved Market: A $342 billion market ripe for disruption through superior technology and service delivery.
Defensible Service Model: While technology can be replicated, building superior service operations with exceptional customer experience creates sustainable competitive advantages.
Proven Execution: 2nd time founders with insurance domain expertise and startup scaling experience.
Looking Forward
The insurance industry is at an inflection point where consumer expectations, regulatory requirements, and economic pressures demand better claims experiences. And ClaimSorted is fundamentally reimagining what claims handling can be.
We’re excited to support the ClaimSorted team as they scale their AI-first approach to capture meaningful share in this enormous, fragmented market while delivering genuinely better outcomes for insurers and their customers.
This is the kind of transformative potential we look for in our investments: exceptional teams solving massive problems with differentiated approaches in markets ready for disruption.
