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Insurance Claims

Audit AI Claims Decisions Against Policy, Evidence, and Regulation

Ensure AI-driven claims adjudication, denial rationale, and settlement recommendations are evidence-supported and regulation-compliant.

State insurance regulationsNAIC Model LawsUnfair Claims Settlement Practices ActState DOI market conduct standardsBad faith statutes
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The Problem

Insurance carriers are deploying AI to triage, adjudicate, and even deny claims at scale. The efficiency gains are real, but so are the risks. When an AI system denies a homeowner's water damage claim because it classified the damage as 'flood' (excluded) rather than 'plumbing failure' (covered), the policyholder suffers — and state regulators notice. Departments of Insurance are increasingly scrutinizing AI-driven claims decisions, and carriers without decision-level audit trails face market conduct examination findings, bad faith litigation, and regulatory penalties.

  • AI claims denials lack the specific policy language citations regulators require
  • Automated triage misclassifies claim types, leading to incorrect coverage determinations
  • No evidence trail connecting AI recommendations to claims investigation findings
  • State DOI market conduct exams can't be answered without decision-level documentation
Evidence Payload
evidence
Claim type: homeowners water damage. Loss date: 2024-03-15. Adjuster inspection: burst pipe in upstairs bathroom. Damage...
policy_context
Policy form: HO-3 (special form). Water damage coverage: sudden/accidental discharge from plumbing system — COVERED. Flo...
ai_generated_content
RECOMMENDATION: DENY — Claim classified as flood damage per exclusion §III.A.3. Water intrusion pattern consistent with ...

What Gets Submitted

What gets submitted when an AI insurance claims decision is audited

evidence
Claim type: homeowners water damage. Loss date: 2024-03-15. Adjuster inspection: burst pipe in upstairs bathroom. Damage assessment: $34,200 (structure) + $12,800 (contents). Photos: 14 images uploaded. Prior claims: 1 (wind damage 2022, paid $8,400).
policy_context
Policy form: HO-3 (special form). Water damage coverage: sudden/accidental discharge from plumbing system — COVERED. Flood exclusion: surface water, overflow of body of water — EXCLUDED. Deductible: $2,500. Policy period: active. Sublimit: none for water damage.
ai_generated_content
RECOMMENDATION: DENY — Claim classified as flood damage per exclusion §III.A.3. Water intrusion pattern consistent with external water source.
model_trace
Claim intake → damage classification → policy form lookup → coverage determination → exclusion check → settlement calculation → recommendation
model_metadata
model: claims-adjudication-v2.8, confidence: 0.64, classification_method: image_analysis + text, last_retrained: 2024-01-20
redacted_fields
policyholder_ssn, bank_routing, medical_records

How the Gate Works

Step 1

Submit Evidence

AI decision + evidence payload submitted for structured evaluation

Step 2

Review Against Policy

Decision evaluated against Insurance Claims regulations and policy context

Step 3

Verdict & Audit Trail

Structured verdict with failure categories, corrections, and immutable audit record

Evaluation Taxonomy

Failure Categories

  • Incorrect damage classification
  • Wrong policy form applied
  • Coverage determination error
  • Missing policy language citation
  • Inadequate denial explanation
  • Investigation findings ignored

Business Impact

  • Bad faith litigation
  • DOI market conduct finding
  • Regulatory penalty
  • Policyholder complaint escalation
  • Systematic underpayment exposure

Evidence Sufficiency

  • Complete claim file with investigation
  • Partial investigation — missing adjuster report
  • Critical evidence conflicts
  • Insufficient documentation for determination

Example Verdict

verdict: blocked decision_type: claims_adjudication failure_categories: [incorrect_classification, coverage_error] primary_failure: incorrect_classification severity: critical business_impact: bad_faith_litigation_risk EVIDENCE REVIEW claim_type: water_damage adjuster_finding: burst pipe (plumbing) ✓ ai_classification: flood ✗ INCORRECT policy_form: HO-3 coverage_check: plumbing discharge = COVERED exclusion_check: flood exclusion does NOT apply FINDING "AI classified damage as 'flood' based on image analysis, but adjuster inspection confirmed burst pipe origin. Plumbing system discharge is covered under HO-3 §I.A.2, not excluded under §III.A.3. Denial recommendation is INCORRECT." CORRECTED RECOMMENDATION "APPROVE — Covered loss under HO-3 plumbing discharge provision. Payment: $34,200 + $12,800 - $2,500 deductible = $44,500." AUDIT TRAIL reviewer: sme_claims_5673 reviewed_at: 2024-04-10T16:33:21Z policy_version: ho3-2024-ed escalation: auto (confidence < 0.70)

Compliance Frameworks

State insurance regulationsNAIC Model LawsUnfair Claims Settlement Practices ActState DOI market conduct standardsBad faith statutes

Frequently Asked Questions

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