Florida advances bill on AI use in claims handling
New legislation filed in Florida would place AI parameters within insurance claims handling and require mandatory human reviews of claim denials as soon as July 1, if passed.
HB 527, and companion bill SB 202, would apply to information provided to insurers by algorithms, artificial intelligence systems, or machine learning systems, none of which may serve as the sole basis for adjusting or denying a claim, in whole or in part.
The bills also state that when an insurer plans to use any of the above in its claims handling processes, it must detail in its claims handling manual the manner in which the systems are to be used and how it complies under the proposed law.
The person who reviews claim denials would have to be a “qualified human professional” — “an individual who, under the Florida Insurance Code, has the authority to adjust or deny a claim or a portion of a claim and may exercise such authority over a particular claim.”
According to the bills, before adjusting or denying a claim or a portion of a claim, the professional would be required to:
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- “Analyze the facts of the claim and the terms of the insurance policy independently of any artificial intelligence system, machine learning system, or algorithm;
- “Review the accuracy of any output generated by such a system or algorithm; and
- “Determine that the claim or portion of the claim is not payable under the terms of the insurance policy and should be denied or that the claim payment should be reduced.”
If passed, the Office of Insurance Regulation would be able to conduct market conduct examinations, investigations, or use any method it deems necessary to verify compliance with this section, according to the bills.
The Financial Services Commission can, under the bills, adopt rules to implement the requirements.
The Insurance and Banking Subcommittee found its substitute for the House bill favorable on Tuesday. SB 202 remains in committee.
Florida Politics reports that Rep. Hillary Cassel (R-District 101), HB 527 sponsor and vice chair of the House Insurance and Banking Committee, said the bill “’addresses a growing challenge in our insurance markets’ with a ‘clear and reasonable safeguard’ against algorithm-driven decisions.”
“Cassel tied the bill to the shooting of a prominent health care CEO in 2024,” the article states.
“The genesis of this bill came to me with the murder of the United Healthcare CEO,” Cassel said, according to the article. “One of the alleged motives was the denial basis by that company, and there’s currently a class action that shows allegedly that 90% of their claims were denied with errors when they utilized AI.”
In 2023, the National Association of Insurance Commissioners (NAIC) approved a model bulletin on the use of AI by insurance companies. It outlines the need for processes and controls to prevent possible AI inaccuracies, discriminatory biases, and data vulnerabilities.
The bulletin reminds insurers of established regulatory laws, such as the Unfair Trade Practices Model Act, that regulate unfair methods of competition or unfair or deceptive acts. It states that governance and controls on AI systems are needed to comply with these laws.
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