Part 1 of 4 in a Field Guide series on AI and claim denials.
There is a lot of interest in using AI to accelerate claim decisions, and there are real benefits to decisions that are both fast and accurate, particularly when a customer gets paid sooner. There are caveats. A customer who is quickly paid less than expected can turn a simple claim into a complex one, and a customer whose claim is denied quickly may feel the decision was inappropriate. This series looks at how the industry currently views automated denials. Part 1 starts with health insurance, where thirteen states have already written rules, and what those rules suggest for P&C claims. Part 2 covers P&C regulation and adjuster licensing, Part 3 the litigation testing automated claims decisions, and Part 4 what "sole basis" has to mean in practice.
Thirteen states limit AI-only denials in health insurance
Thirteen states have enacted laws that limit how health insurers may use AI to deny claims or prior-authorization requests: Alabama, Arizona, California, Colorado, Georgia, Illinois, Iowa, Maryland, Minnesota, Nebraska, Texas, Utah, and Washington. California's took effect on January 1, 2025, and most of the others take effect between September 2025 and January 2027. All of them apply to health coverage and utilization review. None applies to auto, homeowners, or commercial lines.
The laws share a common idea, expressed in different ways. Most require that a licensed or clinical professional, such as a physician, medical director, or clinical peer, make or review an adverse medical-necessity decision, or bar the insurer from using AI as the sole basis for it. Texas goes furthest, barring a utilization review agent from using an automated decision system to make an adverse determination in whole or in part. Others are narrower. Iowa bars AI from being the sole basis for a prior-authorization denial without naming a particular reviewer. Utah pairs disclosure of AI use with a requirement that the reviewer exercise independent medical judgment. Illinois has added a separate rule that downcoding determinations be made or reviewed by a natural person. None of the laws says what independent review has to look like in practice, a question Part 4 takes up.
The same rule translates directly to P&C claims
Substitute a coverage or valuation decision for the medical-necessity determination and these laws read naturally as P&C rules. The actions they reserve to a person, denying, delaying, or downgrading a request, have direct counterparts in a claims operation: a denial, a reduced payment, or a claim closed without payment. A P&C version would let AI triage, score, and recommend, but would require a qualified person to make the adverse decision independently of the model's output, with a file that shows it. That is close to what Florida's HB 527 and SB 202, which died in committee in 2026, and New Jersey's A5494 have proposed. This kind of rule is likely to spread into related areas such as workers' compensation.
Licensing may explain why P&C has no statute yet
No state has enacted an AI-denial statute for P&C. One reason may be that many states already tie the claim decision to a licensed person. Where a state licenses adjusters, adjusting a claim, including denying it, is a legal act performed by an individual. In those states a requirement that a human make the decision may already be largely in place without an AI-specific law, although coverage varies, particularly for company adjusters. Part 2 covers adjuster licensing and the P&C bills in detail.
Closed-without-payment ratios already draw scrutiny
P&C claims practices already face review without an AI statute. The share of claims a carrier closes without payment, known as the closed-without-payment (CWP) ratio, has been a regulatory screening flag for years. Florida subjects any residential-property insurer whose ratio of hurricane claims closed without payment is among the top 20% of insurers to a market conduct examination (Fla. Stat. § 624.3161(7)). State insurance departments also track CWP rates routinely through the NAIC's Market Conduct Annual Statement program.
In 2026 the ratio also became a public issue. An August 2026 Wall Street Journal analysis of insurers' NAIC filings found that auto insurers closed 45% of liability and medical claims without payment in 2025, up from roughly 35% a decade earlier. In April, Weiss Ratings identified 15 large insurers that closed 49.7% or more of their 2025 homeowner and farmowner claims without payment. The Insurance Information Institute (Triple-I) disputed the framing. It noted that claims close without payment for reasons unrelated to wrongful denial, such as below-deductible losses, duplicate filings, or coverage that was never triggered, and that the raw ratio should not be read as a denial rate.
The health laws point to the likely P&C standard
That scrutiny has focused on human-run processes, so the exposure predates AI. What AI changes is visibility. If an AI-assisted process raises a carrier's CWP ratio or shortens its time to close, it leaves a clearer record for a regulator or reporter to reconstruct than the same pattern produced by adjusters under caseload pressure. The practical standard in P&C is likely to converge with the one the health laws already put in writing: an individualized, documented basis for each denial, reduced payment, or closure, made by a person rather than a model. Part 3 covers the litigation exposure that follows when that documentation isn't there.
Sources: Alabama SB 63 (2026). Arizona HB 2175 (Laws 2025, ch. 165). California SB 1120 (Stats. 2024, ch. 879), amending Cal. Health & Safety Code § 1367.01 and Cal. Ins. Code § 10123.135. Colorado HB26-1139 (2026). Georgia SB 444 (2026). Illinois HB 5395 (Public Act 103-0650), 215 ILCS 134/45.1, and SB 3114 (Public Act 104-0569). Iowa HF 2635 (2026). Maryland HB 820 (2025 Md. Laws ch. 747). Minnesota HF 4188 (Minn. Laws 2026, ch. 124). Nebraska LB 77 (2025). Texas SB 815 (2025), adding Tex. Ins. Code § 4201.156. Utah SB 319 (2026). Washington E2SSB 5395 (2026). Florida HB 527 and SB 202 (2026); New Jersey A5494 (2026). Fla. Stat. § 624.3161(7) on hurricane-claims market conduct exams. NAIC Market Conduct Annual Statement data call and ratios for homeowners and private passenger auto (claims closed without payment). Weiss Ratings, "15 Large Home Insurers Closed More Than Half of Claims in 2025 With No Payout Whatsoever" (April 16, 2026). Triple-I media statement, "Understanding Claims Closed Without Payment: Context Behind the Numbers" (June 1, 2026). Jean Eaglesham and Jaclyn Jeffrey-Wilensky, "If You Get in a Car Crash, the Risk Is Growing Your Insurance Won't Pay," Wall Street Journal (August 9, 2026), an analysis of insurers' regulatory filings with the NAIC.
This is Part 1 of 4. Part 2 covers where P&C AI-denial regulation and adjuster licensing are headed.
