Insurance laws will protect us from AI decision making, experts tell panel

Insurance companies will always be held responsible for any decisions made with help from artificial intelligence even as the technology becomes more widely adopted and may someday be used to pay claims, insurance experts told a panel of state legislators on Tuesday.

The Florida House of Representative’s Subcommittee on Insurance and Banking invited several national insurance advisers to provide an overview of insurers’ use of AI in their industry, in part to address concerns that AI will be the sole driving force in claims decisions, especially by health insurers.

Bills filed during the spring legislative session would have required insurers’ decisions be made by “qualified human professionals” while prohibiting use of artificial intelligence, algorithms, or machine learning systems as the sole basis for determining whether to pay or deny claims.

Neither the House nor Senate versions of the bill advanced very far, but ahead of next year’s session, lawmakers remained concerned about how humans might someday be cut out of important insurance decisions as the technology evolves.

Insurance advisers in the hearing said that AI is helping larger insurers improve their operations in a number of ways, including speeding up claims decisions.

Ways insurers use AI include spotting signs that claims are fraudulent, although red flags spotted by AI software are always investigated by humans, said Thomas Koval, former general counsel and chief legal officer of FCCI Insurance Group and past chairman of the Florida Insurance Council.

AI can boost insurer efficiency, accuracy, and speed of resolving common types of claims, Koval said. It also helps streamline “back-room” tasks such as human relations, mail, sales, marketing, distribution and new product development, he said.

Paul Martin, vice president of state affairs for the National Association of Mutual Insurance Companies, said insurers use AI to increase precision in setting prices, develop new products such as private flood insurance, and help policyholders guard against becoming victims of cybercrime.

Rep. Marie Paule Woodson, a Democrat who represents parts of Broward and Miami-Dade counties, asked if the use of AI will help reduce premiums charged to consumers.

Koval responded that efficiencies developed through use of AI will reduce premiums by enabling fewer people to handle specific tasks in insurance offices.

“It may not displace the adjuster, it may not displace the workforce, but it probably means sometimes one person can do something instead of two,” and “would hopefully have a cost-savings effect on the overall cost of operating an insurance company, just like any other company,” Koval said.

Woodson pressed: “So why aren’t we seeing a reduction in premiums?”

Gary Sullivan, senior director of emerging risks for the American Property & Casualty Association, responded that “rates, especially in homeowners (insurance), have actually come down due to increased competition that’s been occurring in the state.”

While many insurance companies have filed for slightly reduced rates or requested that no rate changes over the past year, only 19 of 90 companies reduced their average costs for policyholders between January and May, a review of cost data by the South Florida Sun Sentinel showed in August. Insurance industry leaders have credited reforms enacted in 2022 and 2023 for stabilizing rates.

In addition, improved risk analysis through aerial imagery and other AI-driven methods can lead to “risk prevention, (and) risk prevention relates to fewer losses, (and) fewer losses relates to competitive pricing,” Koval said.

Rep. Hillary Cassel, a Republican representing part of Broward County, sponsored one of the failed AI bills earlier this year. She said the bills resulted from litigation across the country that accused health insurers of denying claims based solely on AI, without human review.

She asked, “What law in Florida is on the books that’s going to tell an insurance company that AI cannot be the sole basis for the determination of a denial of a claim?”

None of the panelists directly responded to the question. But Martin said that policyholders are ultimately protected by existing Florida laws that hold insurers responsible for decisions made by companies, as well as for safeguarding sensitive policyholder information.

“If it’s an AI platform, if it’s a human platform, the insurance company is always responsible,” he said.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071 or by email at rhurtibise@sunsentinel.com.

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