California bans AI from rejecting insurance claims: How AI was used and impact of the new law

California has recently passed a law that prohibits the use of artificial intelligence (AI) in rejecting insurance claims. The move comes in response to growing concerns about the fairness and transparency of AI-powered decisions in the insurance industry. The new law aims to ensure that all claims are reviewed by human agents, to protect consumers from potential biases and errors in AI systems.

How AI was used in insurance claims

• Automated Claim Processing:

Insurance companies are increasingly turning to AI to automate the claim process. AI systems can quickly analyze large amounts of data, allowing claims to be approved or rejected faster.

• Risk assessment:

AI algorithms evaluate the risk associated with each claim by analyzing various factors such as the policyholder’s history, the nature of the claim, and other data. This helps insurers decide whether to approve or reject a claim.

• Fraud detection:

AI is also used to identify potentially fraudulent claims by detecting patterns or anomalies that may be missed by human reviewers.

Concerns associated with AI in claim rejections

Although AI can speed up the claims process, it has also raised several concerns:

• Lack of transparency:

Policyholders often do not understand how AI makes its decisions, leading to frustration and distrust.

• Bias and discrimination:

AI systems may inadvertently maintain biases present in the data they are trained on, potentially leading to unfair claim rejections.

• Errors and inaccuracies:

AI algorithms can sometimes make mistakes or fail to consider unique circumstances that a human reviewer might catch.

Impact of the new law

With the new law coming into effect, California aims to ensure that insurance claims are evaluated in a fair and transparent manner. Human agents will now be responsible for reviewing claims, reducing the risk of biases and errors inherent in AI systems. The move is expected to increase consumer trust in the insurance process.