The term insurtech is used to describe organizations of many types, including so-called full-stack insurtechs, which underwrite and distribute their own insurance products through a technology platform, and other, lower-profile companies that focus on enhancing the operations of existing insurers and brokers. 

As the sector matures, the different strategies are yielding diverging results. 

Some of the full-stack insurtechs may be saddled with higher costs and are experiencing high loss ratios, which makes them potentially more vulnerable to market downturns, while technology firms that supply services to a particular function of core operations, such as a specific application program interface, may be better positioned to weather any storms, experts say.

About 15% of insurtech investments are deployed toward providers of products — such as a specific API — that enhance an insurer’s existing technology and make it more efficient, said Emmalyn Shaw, managing partner with Flourish Ventures, a San Francisco-based venture capital firm with interests including insurtech and data and analytics. 

Such services for traditional insurers may include software, APIs and business process automation. “While that is a smaller percentage of capital deployed, those are the types of companies that will continue to have value because they’re ultimately serving a very important need for these incumbent insurance providers,” Ms. Shaw said.

Over time, “you will see a move toward the infrastructure and technology enablement solutions to help drive more efficiency and automation into traditional incumbent insurance providers,” Ms. Shaw said.

“Companies providing incremental improvements in many facets of a business can do really well in insurtech,” said Parker Beauchamp, founder and managing partner of Boulder, Colorado-based Markd VC LLC, a venture capital firm focused on insurtech that in March launched a $100 million investment fund. 

From creating small gains in process efficiency to improving methods of transferring data and continuing to build on improvements, a company can establish “a culture of incrementally improving things continuously,” Mr. Beauchamp said. 

While some insurtechs seek to become full-stack operations underwriting risk, others focus on a particular part of the insurance process. 

For example, certificates of insurance may be “unglamorous,” but the ability to look one up online instantly can be advantageous and convenient for policyholders and others, said Amelia Gandara, senior investment professional in Columbus, Ohio, with Nationwide Mutual Insurance Co.’s venture capital team. “You’re seeing the digitization of all the different elements of insurance,” she said.