Insurance Companies Deploy AI Systems to Deny Claims Faster, Raising Concerns Over Patient Care

AI Insurance Companies Transform Claims Processing

Insurance companies are rapidly adopting AI to process and deny claims at unprecedented speed, fundamentally changing how policyholders interact with their health, home, and auto coverage 1

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. By 2023, nearly 88 percent of auto insurance companies were reported to be using or planning to use AI for claims processing, while a survey by the National Association of Insurance Commissioners found that 84 percent of health insurers are already using AI to handle tasks like prior authorizations for medical care 1

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. The shift toward AI automation marks a significant departure from traditional human review processes, raising concerns about technological flaws and their impact on vulnerable patients.

AI Systems to Deny Claims Trigger Legal Battles

The deployment of AI in underwriting has already generated serious legal challenges. UnitedHealth currently faces a class-action lawsuit alleging that AI-denied Medicare nursing care contributed to patient deaths 2

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. The case highlights the most severe potential consequences when AI systems make errors in judgment about medical necessity. Meanwhile, Iris Smith, an 80-year-old Florida retiree suffering from arthritis, may be a victim of AI-fueled preauthorization denials as her home state is one of six exploring an AI Medicare screening program 1

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. Smith told the Palm Beach Post: "I don't think a corporation should be telling people what they can and can't do. My doctors know me. I know my doctors. And when I'm in pain -- which is every morning, waking up to two fists that can barely open -- I need something to take care of the pain" 1

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Regulatory Frameworks Lag Behind Industry Adoption

Currently, 22 states have refused to adopt regulations to regulate AI in insurance, including Florida, Georgia, Oregon, and Minnesota 1

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. Florida lawmakers attempted to pass legislation in 2025 requiring human review for AI-generated denials, but while the bill passed the House, it died in the Senate 2

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. A Trump executive order discouraging state AI regulations further complicated efforts to establish consumer protection measures 2

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. Florida Representative Lois Frankel has emerged as a fierce opponent of AI Medicare screening programs, telling the Palm Beach Post: "We believe Medicare was based on a promise that if your doctor says you need care, if you're hurt and you need care, Medicare will be there for you, not AI" 1

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Unjust Claim Denials and the Appeals Gap

With AI for claims processing, clerical errors or technicalities on forms, and even errors with the AI system itself, can automatically result in denied medical care 1

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. Most people give up and don't even file appeals because the process is too confusing or exhausting, which creates a favorable outcome for insurance companies looking to minimize financial losses 2

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. However, nonprofits like Counterforce Health now offer free AI tools that analyze denial letters and draft customized appeals, creating an AI-versus-AI battleground 2

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. The development underscores how health insurance has become increasingly adversarial, with policyholders forced to deploy their own technology just to access the coverage they've paid for. As health insurers continue expanding AI deployment for prior authorization approvals—with 68 percent already using it according to the National Association of Insurance Commissioners survey—the question remains whether regulatory frameworks will catch up before more patients are denied necessary care 2

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