Growing use of insurance claims bots and algorithms raises concerns for litigators

by Meagan Martin

In December 2016, the insurance company Lemonade announced that it had set a world record for the time it took to resolve an insurance claim – three seconds. Lemonade said that it was able to review, approve, and send payment for the claim – which involved a stolen parka – thanks to the company’s claims-processing bot, known as “A.I. Jim.” This chatbot is able to receive claims information from Lemonade’s smartphone app, review it against the insured individual’s policy, and run algorithms designed to detect fraud, enabling “A.I. Jim” to resolve many insurance claims in just a few moments.

More than one year later, Microsoft and other major tech companies believe that chatbots are the future of the insurance industry. Because insurance bots are able to quickly and accurately gather information about insurance claims, experts say that this technology has the opportunity to deliver faster service to customers, while also handling simple inquiries for brokers, allowing them to concentrate on more difficult claims or attracting new business.

Insurance Chatbots and Bad Faith Insurance Litigation

The growing use of automated bots to handle complex insurance claims has raised questions about how this technology will affect claims disputes – and in particular, allegations of bad faith practices on the part of insurers.

Bad faith insurance claims involve allegations that an insurance company has wrongfully denied a claim in violation of the terms of the insured individual or business’ policy. In some cases, allegations of bad faith insurance claims can lead to litigation against the insurance company on the part of individuals who believe their claim was wrongfully denied.

Some legal experts believe that the use of insurance bots may deter bad faith insurance claims under the presumptions that computer algorithms are more “objective” than humans who review claims. This assumption is known as “algorithmic bias.” The increased understanding that algorithms programmed by humans are subject to some of the same biases are the people who programmed them may eventually erode this algorithmic bias. But for now, the increased use of insurance bots creates a new challenge for insurance litigators.

The discovery process for insurance litigation claims often involves questioning insurance company representatives about their basis for making a claims decision, and reviewing their emails, notes, and other documentation to determine whether a claim was denied in bad faith. But when bots and algorithms are the ones making insurance claims decisions, it may be much harder for attorneys to clearly explain an insurer’s rationale for denying a claim and prove that the company acted in bad faith.

Online ratings for insurance company bots show that the bad faith denial of claims may already be a problem for this technology. Many online commenters say that their claims were denied by a bot without an explanation or an investigation on the part of the insurance company. If these statements are true, they could fall within the realm of conduct prohibited by the Unfair Claims Settlement Practices Act, which has been adopted under various guises in all 50 states.

Insurance companies may already be taking steps to avoid these problems by allowing bots to handle only simple claims, and referring more complex insurance matters to human claims adjusters. But as the use of algorithms and chatbots spreads throughout the insurance industry, the role of this technology in handling insurance claims may become an increasingly significant problem for insurance litigators.

Bad Faith Insurance Litigation Claims Filed by Heygood, Orr & Pearson

Insurance companies have an obligation to properly investigate and resolve insurance claims in good faith. If you believe you were treated unfairly by an insurance company, you may wish to consult with an attorney who has the experience and resources to pursue a “bad faith” lawsuit against an insurance company.

The lawyers at Heygood, Orr & Pearson have handled hundreds of cases involving bad faith insurance claims or other insurance disputes. Our law firm has the financial resources to handle insurance litigation matters from start to finish. In many instances, we have invested hundreds of thousands of dollars in order to take a case to trial on behalf of our client. At Heygood, Orr & Pearson, we are committed to achieving justice for our clients, whatever the cost.

If you or a loved one believe you were the victim of bad faith on the part of an insurance company, contact Heygood, Orr & Pearson to learn more about your legal rights. For a free legal consultation, please call us toll-free at 1-877-446-9001, or follow the link to our free case evaluation form to get started.