Can AI adjust insurance claims?

Editor's Note: This is part of a series that examines the use of AI in the claims space.

A breach of contract suit between AI software and technology providers in Texas could have greater significance for how AI is used for adjusting insurance claims.

The plaintiff, Kanda Software, and defendant Claims AI, had struck a deal in April 2024 to work together to use AI technology to collect evidence and assess damages in homeowners insurance claims. While the two companies ended up in court rather than in the marketplace, the possibility of AI adjusters could conflict with many U.S. states that require insurance claim adjusting to be done by licensed professional people. Only 16 states do not require insurance adjuster licensing, according to AdjusterPro, a training and licensing provider for insurance claims.

The insurance industry's transformation from paperwork to digital has led to the possibility that claims adjustment could be handled digitally, as Sarah Thomas, managing partner at Jones Jones LLC, a workers comp insurance law firm, explained.

"For decades, most insurers have been dealing with e-software and e-claims in the sense of not looking at paper files anymore," she said. "It's all in people's systems. It's all on our computers. It's all in some e-claims software application. It was the next easy step to say, Okay, well, we have everything in our computer systems. How can we utilize that to look at metrics, to look at data outcomes, to forecast where these situations are going, to put costs on it, to figure out workflow, to figure out how many examiners or claims professionals we need. It was almost like maybe we were doing AI without even realizing it."

Managing workforces may deter insurers from adjusting claims with AI more than licensing requirements does, according to Thomas. "The main issue I'm seeing is this question of whether this will take over examiner jobs or claims professional jobs," she said. "I don't think the broad majority of our industry thinks that at all, but sometimes that fear makes people not want to dive into this world, but it could be hugely helpful to us. It's just about utilizing it right as a tool."

CSAA Insurance Group is developing a virtual claims assistant (VCA), but will limit its use, according to Bob Vallliere, executive vice president and chief operations officer, CSAA Insurance Group.

"We say to our people, VCA is not a replacement for adjusters. It's just there to augment their capabilities," he said. "It's there to make us smarter and better experts in claim management. It steers clear of just using computers to adjust claims."

In addition, CSAA could still tell regulators that it retains human decision making and show documentation of adjustment decisions to explain how AI is being used, Valliere added.