What is AI claims processing?

AI claims processing uses artificial intelligence and machine learning to help insurance companies handle claims more efficiently, such as by reviewing documents and analyzing photos to assess damage.

Depending on the insurer and the type of claim, AI can estimate repair costs, automate routine tasks, and provide around-the-clock customer support, including claim status updates. These tools can shorten processing times, provide faster claim updates, and help insurers handle routine claims more efficiently. 

AI doesn't replace human claims adjusters, however. Insurers typically use it to handle repetitive tasks and expedite routine claims, while adjusters review more complex situations, such as disputed claims, high-value losses, and settlement appeals.

“AI can certainly assist insurance adjusters, loss consultants, and public adjusters in streamlining the estimating process, but it will never take the place of a human being making nuanced judgment calls that require discretion, executive decision-making, and further inquiry,” said Robert Crown, Sr. Professional Public AdjusterAn adjuster handles claims for the insurance company. They assess the damage and determine how your coverage applies to damages and injuries. and Property Loss Advocate, and Certified Appraiser with Crown Adjusting, LLC.

The pros of AI in insurance claims for policyholders

AI delivers measurable benefits to policyholders in routine, clearly covered claims through efficiency and accessibility.

  • Faster claim resolution. AI can review documents, analyze photos, and estimate repair costs much faster than a manual review.  Insurer Lemonade uses AI to resolve 40% of claims instantly, and Shift Technology reports that claims processing went from weeks to minutes.
  • Consistent routine decisions. AI follows the same rules each time it evaluates a claim, helping reduce inconsistencies in routine decisions.
  • Fraud protection. AI identifies unusual patterns, duplicate claims, and other signs of potential fraud that might otherwise go unnoticed, increasing insurance rates caused by fraudulent claims.
  • 24/7 claim status access. Instead of waiting for business hours, policyholders can check their claim status, upload documents, or find out what information is still needed at their convenience.
  • More accurate damage assessment. AI quickly and consistently identifies visible damage, reducing the time it takes to begin the repair process. The quality of the assessment still depends on clear photos and complete documentation. 

The cons of AI in insurance claims for policyholders

The use of AI in insurance claims can lead to problems for policyholders, including higher denial rates and reduced transparency.

  • Higher denial rates. AI has been shown to deny claims at a higher rate than a human adjuster.
  • Limited transparency. It is challenging for a policyholder to understand exactly how their insurer uses AI in insurance claims. To combat this, NAIC model bulletins now require insurers to explain how AI systems make decisions, but enforcement varies by state.
  • Algorithmic bias risk. Because AI learns from historical data, it can also reflect historical biases if those datasets aren't representative. IBM research shows that AI trained on historical insurance data can encode past discriminatory patterns.
  • Weakened adjuster expertise. If AI handles the majority of claims processing, adjusters can lose their skills and experience over time and come to rely too much on the computer.
  • Data privacy exposure. Policyholders are vulnerable to cybersecurity threats and the unintentional sharing of their personal data through AI platforms.

How AI is used at each stage of the claims process

AI is used to collect initial claim data, document and review images, screen for fraud, determine coverage and routing, and make payment or denial decisions. A human adjuster becomes involved for complex claims or appeals.

  1. First Notice of Loss. When you report a claim, many insurers use AI in claims portals to collect information, answer basic questions, and help you submit photos and other documentation without requiring you to complete structured forms.
  2. Document and Image Review. AI can review documents and photos submitted to identify visible damage and generate an initial repair estimate. It can also check that your claim information is complete, preventing lengthy delays.
  3. Fraud Screening. Insurers use AI to compare claim information against large datasets to identify patterns that may indicate fraud or inconsistencies. If a claim is flagged, it is usually reviewed by a human adjuster before any action is taken.
  4. Coverage Determination and Routing. AI can compare the details of a claim with the policy to identify the coverages that may apply. It also helps route claims to the appropriate adjuster or department based on factors such as the type of loss, estimated damages, and claim complexity, speeding up the claims process for policyholders.
  5. Payment or Denial Decision. Many insurers use AI to estimate repair costs and recommend a settlement for routine claims. However, an adjuster typically becomes involved for complex or high-value claims.
  6. Human Review or Appeal. If you are unhappy with your settlement, you can request a human adjuster review the claim and determine if a different outcome is warranted.

Your rights when AI makes a decision about your claim

Policyholders have the right to question or appeal a claim decision, even if AI was used during the claims process. While appeal procedures vary by insurer and state, these steps can help you challenge a decision you believe is incorrect.

  1. Request the denial decision in writing. Contact your insurer within 30 days to request a written explanation of why your claim was denied or your settlement reduced, and cites how your policy does or does not apply. 
  2. Request a human review. You can ask a human adjuster to review your claim and settlement to uncover any additional details or documentation that an automated system may have missed.  Many jurisdictions require insurers to offer this process and require policyholders to request it explicitly in writing.
  3. File a formal written appeal with the insurer. If you still don’t agree with the claims decision, you can file a formal appeal with your insurer following their procedure. Submit any documentation and photos that explain your claim.
  4. Escalate to your state insurance commissioner. If you’re still unable to resolve the claim, file a complaint with your state insurance commissioner. While they can’t guarantee a different outcome, they can investigate whether your insurer followed state laws and handled the claim appropriately. 

Everyone has the right to appeal a claims decision, and consumer AI appeal tools are making it easier for policyholders to dispute claims.

What to look for in an insurer's claims process before you buy

Before choosing an insurer, take a close look at its claims process, including its AI disclosure policy, the availability of a human to deal with, claims denial rate, customer satisfaction, and the NAIC complaint index.

  • AI disclosure policy. Insurers should be transparent about how AI is used in the claims process, when a human adjuster is involved, and how decisions are made. 
  • Human escalation availability. The claims process should include the ability to speak with a human adjuster when you have questions or disagree with a decision.
  • Denial rate and appeal track record. Research the company's claims-handling reputation and learn how its appeals process works to assess the company’s transparency.
  • Claims satisfaction score. Look at claims satisfaction surveys to see which insurers provide the best experience and which ones are more difficult to deal with.
  • NAIC complaint index. Check the NAIC complaint index to see how many complaints an insurer gets compared to its size. Fewer complaints than expected can indicate how easy an insurer is to deal with.

Compare the best car insurance companies for claims based on the Insurance.com claims satisfaction survey of 2,000 policyholders.

Frequently asked questions

Can an insurance company deny my claim using only AI?

Yes, there are no state laws regarding AI denying an auto insurance claim. The NAIC's AI Model Bulletin sets expectations for insurers regarding how they use AI and how transparent they are with policyholders.

You can appeal an AI insurance claim decision by requesting a written denial, asking for a human review, and filing a formal appeal with your insurer. You can then file a complaint with your state insurance department, which will investigate.

Yes, AI can process and resolve simple claims faster. For example, insurer Lemonade reported that it uses AI to resolve 40% of its claims instantly, and Shift Technology showed claims processing went from weeks to minutes.

AI systems can reflect any bias introduced in their training data. However, the NAIC oversight requirements include bias monitoring.

No, AI is useful for quick, easy-to-understand claims. However, a human adjuster is needed for more complex or high-value claims and to handle any claims disputes.

No state requires specific human review of AI claim denials. However, there is a broad expectation that insurers will use a human agent to review denials. Additionally, a policyholder can request that a human become involved in their claim if necessary.

AI analyzes claim timing, location, policyholder history, payment patterns, and correlations with other claims to detect potential insurance fraud and identify fraud rings that inflate premiums. However, false positive flags can delay or deny legitimate claims.

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