The insurance industry has a pilot problem. Not a shortage of pilots — there are more technology proofs of concept running inside insurers and brokers than at any point in history. The problem is that almost none of them convert into production deployments that generate commercial value.
The data is stark. Gartner projected that at least 30% of generative AI projects would be abandoned after proof of concept by end of 2025, and separately warned that through 2026, organisations may abandon 60% of AI projects that are not supported by AI-ready data. West Monroe's survey of 300 insurance executives found that while nearly every carrier has modernisation plans in motion, few are making meaningful progress — 20% have defined strategies but haven't advanced execution, and two-thirds expect it will take another three to seven years to move core systems to the cloud.
The pilot-to-production gap is not a technology problem. The technology usually works. It is a structural, organisational, and commercial problem — and until both sides of the partnership understand why it happens, it will keep happening.
The seven reasons partnerships stall after the proof of concept
1. The pilot was designed to demonstrate, not to decide
Most insurance technology pilots are designed as demonstrations — "let's see if this works" — rather than as decision instruments. They prove that the technology functions. What they don't prove is whether it creates sufficient commercial value to justify the investment required to integrate it into production systems.
The fix is simple but rarely implemented: before the pilot begins, both parties should agree on the specific criteria that will determine whether the project advances to production. Not vague success criteria like "positive results" but quantified thresholds: "If the technology identifies X% of high-risk submissions that would otherwise have been missed, and the estimated loss ratio improvement exceeds Y basis points, the project advances to Phase 2 with the following budget and timeline." Without pre-agreed decision criteria, the pilot produces an interesting report that sits on a shelf.
2. The pilot sponsor has no commercial authority
This is the most common structural failure. The partnership is championed by someone in the innovation team, the digital transformation unit, or a mid-level manager who sees the potential. They have enough authority to approve a small pilot budget — typically £20,000–£50,000 — but no authority to commit the resources required for production integration: IT development time, underwriting process changes, data infrastructure investment, or carrier capacity.
When the pilot succeeds, the sponsor has to build an internal business case, secure budget from a different cost centre, convince IT leadership to prioritise the integration, and navigate procurement. Each of these steps introduces delay, and any one of them can kill the project. Insurance Thought Leadership's analysis confirms that the barriers to scaling are overwhelmingly human factors: 24% cited resistance to change, 23% struggled with unclear value propositions, and 20% pointed to poor user experience — only 13% identified technical issues as the primary obstacle.
3. Nobody planned the integration before the pilot started
A pilot typically runs in a sandbox — isolated from the insurer's production systems. Data is transferred manually, results are reviewed offline, and the technology operates alongside existing workflows rather than within them. This makes the pilot quick to launch but creates a chasm between pilot and production.
Production integration means connecting to the insurer's policy administration system, claims platform, data warehouse, and reporting infrastructure. It means passing the IT security review. It means retraining underwriters or claims handlers. It means changing processes that have been in place for years. If none of this has been scoped, budgeted, or planned before the pilot, the transition from "it works" to "it's live" can take 12–18 months — by which point the momentum, the champion, or the budget has evaporated.
4. The commercial model was never defined
Many pilots proceed without a clear commercial agreement for what happens next. The technology company provides the pilot for free or at a heavy discount, hoping to convert it into a paying relationship. The insurer accepts the pilot without committing to what they would pay for a production deployment. When the pilot concludes successfully, both parties discover they have fundamentally different expectations about pricing, data ownership, exclusivity, and revenue sharing. The negotiation that follows can take months — and often fails because neither side planned for it.
5. The insurer's data isn't ready
A technology company's model might perform beautifully on clean, structured training data. But production insurance data is messy. Claims records are inconsistent. Policy data sits in legacy systems with different formats across lines of business. Exposure data is incomplete or outdated. Gartner has warned that through 2026, organisations may abandon 60% of AI projects not supported by AI-ready data. The data quality problem is often only discovered during the pilot — and fixing it requires investment that wasn't in the pilot budget.
6. Change management was an afterthought
Even when the technology works and the integration is feasible, production deployment requires people to change how they work. An underwriter who has priced commercial fleet business for 15 years based on claims history, vehicle schedules, and trade experience is now being asked to incorporate a telematics score they don't fully trust. A claims handler is being asked to rely on a computer vision assessment rather than their own judgment. Without structured change management — training, communication, feedback loops, and visible leadership support — adoption stalls at the user level. The technology is live in the system but nobody is using it.
7. The technology company ran out of patience — or runway
Insurance procurement timelines are long. A pilot that starts in January might not reach a production decision until September. If the technology company is venture-funded with 18 months of runway, six months of unpaid pilot work followed by a further six months of commercial negotiation consumes the majority of their operational capacity. This is why counter-party risk — the financial viability of the technology partner — is a legitimate concern for insurers, and why technology companies need to be honest with themselves about whether they can sustain the timeline that insurance partnerships demand.
What both sides should do differently
The pilot-to-production gap is not inevitable. It is the result of poor planning by both parties. Here is what needs to change:
Design the pilot as Phase 1 of a defined programme. Before the pilot begins, both parties should document: the success criteria, the decision process, the Phase 2 budget and timeline, the integration requirements, and the commercial model. This doesn't need to be a binding contract — a Letter of Intent or Memorandum of Understanding is sufficient — but it needs to exist in writing.
Ensure the pilot has a senior commercial sponsor. Not just an innovation champion, but someone with P&L responsibility who will benefit from the technology's success and has the authority to commit resources for production deployment.
Scope the integration during the pilot, not after. While the pilot runs, a parallel workstream should be assessing what production integration requires — IT resources, data preparation, process changes, compliance review — so that if the pilot succeeds, the transition plan is ready.
Agree commercial terms before the pilot starts. At minimum, agree the pricing framework and key commercial principles. The specifics can be refined, but the shape of the deal should be understood by both parties before any work begins.
Set a time limit. A pilot without a deadline becomes a permanent experiment. Agree on a 60–90 day pilot with a defined decision point at the end. If the decision is to proceed, the pre-defined Phase 2 plan activates. If the decision is not to proceed, both parties have clarity and can move on.
The partnerships that make it
The technology partnerships that successfully cross from pilot to production share common characteristics. There is a senior sponsor on the insurer side with commercial authority. The success criteria were quantified before work began. The integration path was scoped in parallel with the pilot. The commercial model was agreed in principle early. And both parties treated the pilot not as an experiment but as the first phase of a committed programme.
The pilot graveyard is not populated by bad technologies. It is populated by good technologies that were introduced without the commercial discipline, organisational alignment, and structural planning that insurance partnerships require. The technology companies that survive the pilot-to-production gap are the ones that plan for production from day one.
Preparing for your first insurance pilot? Take the free Partnership Readiness Diagnostic → to identify the structural gaps that cause most partnerships to stall before they scale.