As a result their use of advanced technology in the claims process, insurance companies and brokers face new lawsuits for breach of contract, unjust enrichment, bad faith, RICO violations, conspiracy, negligence, professional malpractice, and, in some states, consumer protection law violations. “These cases assert that AI fails to fairly and honestly investigate claims, uses formulas that artificially and unfairly lower settlement amounts, and is based on historically biased and inaccurate claims payment data incorporating decades of stereotypes and artificially suppressed values.” Said Samuel Lopez.
- Breach of Contract: Some litigants are arguing that the use of biased or unfair AI violates the terms of their insurance contract.
- Bad Faith: This is a serious allegation, where an insurer is accused of acting unreasonably or fraudulently in handling a claim.
Responsible Use of AI
As AI continues to flood the insurance industry, critical questions arise: What due diligence should insurers undertake before implementing AI, and for which claims should it be applied? What constitutes responsible use of AI in insurance?
