AI in insurance claims and underwriting disputes

Insurers' use of AI raises questions about claims decisions, underwriting, pricing and governance. The NAIC's December 4, 2023 model bulletin addresses consumer-impacting AI systems, while New York's July 11, 2024 Circular Letter No. 7 focuses on underwriting and pricing. Medicare Advantage coverage decisions are also addressed in federal program guidance.

Claims and health-plan benefits

In its February 6, 2024 FAQ, CMS explained that Medicare Advantage organizations may use algorithms to assist coverage decisions while remaining responsible for compliance with the program's coverage rules. Medical-necessity determinations must consider the individual patient's circumstances. CMS specifically addressed predictions of post-acute-care length of stay and the need to consider the patient's condition and medical record before terminating coverage.

Estate of Gene B. Lokken v. UnitedHealth Group, Inc. provides a dated litigation example. Plaintiffs alleged that use of nH Predict displaced individualized decisions on post-acute care. On February 13, 2025, the District of Minnesota waived administrative exhaustion on futility grounds and allowed contract and implied-covenant claims to proceed, while dismissing other claims as preempted. The court recorded the parties' disagreement about use of the model and decided a motion to dismiss; the ruling addressed which pleaded claims could proceed. The dedicated case article covers subsequent proceedings.

On March 9, 2026, the court ordered production of relevant records about nH Predict's development and use, while excluding its underlying data, rules, source code and medical guidelines from the disputed request. Defendants filed a second amended answer denying liability on September 4, 2026.

Related legislative coverage includes the Protecting Patients from Automated Denials Act, whose sponsors announced its introduction on July 24, 2026. Their proposal would require physician review of AI-assisted Medicare Advantage prior-authorization denials and authorize federal audits of the relevant processes.

Underwriting and pricing

New York's Circular Letter No. 7 sets supervisory expectations for insurers using AI and external consumer data in underwriting or pricing. It addresses actuarial validity, unfair discrimination, governance, documentation and third-party oversight. It also addresses consumer inquiries and complaints. These expectations are presented in the context of the New York laws and regulations cited in the letter.

Governance and evidence

The NAIC model bulletin calls for a written AI-systems program proportionate to an insurer's use of AI and the potential harm to consumers. It identifies governance, risk controls, testing and third-party arrangements as areas regulators may examine. Its model text leaves the issuing jurisdiction and local legal references for completion; application in a particular state requires checking that state's adopted instrument.

For a specific dispute, distinguish the challenged benefit or pricing decision, the contractual promise, the governing program or jurisdiction, and the role attributed to the system. The Lokken order illustrates why administrative exhaustion, preemption and the pleaded contract terms can determine which claims proceed before the merits of the alleged AI-assisted decision are resolved.

Related articles

• Insurance
• Insurance coverage disputes involving AI
• Protecting Patients from Automated Denials Act (119th Congress)
• New York AI Law
• Legislation and Regulation