Why AI-Driven Claims Handling Should Concern Every Policyholder
The use of software in insurance claim evaluations is not new. For decades, insurers have relied on automated systems, optical scanners, and workflow engines to move claims from intake to resolution with minimal human intervention. Many have thrived by integrating technology and the sharing of data and information.
But the recent and rapid expansion of artificial intelligence (AI), particularly large language models (LLMs), marks a profound shift in the landscape of leveraging technology. What was once a largely mechanical screening process, has evolved into a system capable of reading, analyzing, and interpreting vast quantities of medical and personal information in seconds.
While insurers present these tools as efficiency enhancements, the practical effect for claimants is far more troubling: claims are being denied faster, with less transparency, and often based on opaque algorithms rather than individualized medical judgment. Understanding how AI is being deployed, and how it may affect your disability or health-related claims has never been more important.
The Claims Review Process Was Barely Human to Begin With
Long before AI became a marketing buzzword, insurance companies used automated systems to streamline claim handling. A typical disability or health claim passes through a series of digital checkpoints: data extraction from forms, optical character recognition for medical records, coding, and sorting by software, and finally a brief review by a human adjuster. The process was already heavily invested in automation. Claims also had approved time frames for conditions, which were largely automated and often based on industry friendly publications and resources.
The introduction of AI has intensified this trend. Instead of merely scanning documents, AI systems are now capable of interpreting them—flagging keywords, identifying “patterns of concern,” and recommending denial rationales based on correlations derived from massive datasets. In practice, this can mean the difference between a nuanced evaluation and a blanket denial generated in seconds.
Physicians have begun raising alarms. Earlier this year, the American Medical Association reported that more than 60% of doctors are worried about the use of AI by insurance companies, fearing that algorithmic decision-making may override medical expertise and result in inappropriate denials. Their concerns are warranted. There are numerous class action lawsuits now pending, but those take time to resolve. In the meantime, you’ll want to protect yourself and your claim.
Disability Insurers Have a Long History of Leveraging Tools to Deny Claims
Anyone familiar with long-term disability (LTD) carriers knows that insurers rarely adopt technology to make life easier for claimants. Instead, new tools typically serve the interests of cost containment and denial justification. AI is simply the latest—and arguably the most powerful—addition to an insurer’s defensive arsenal.
With AI, insurers can more easily process claims, at unprecedented speed, flag “inconsistencies” in seconds and search hundreds of pages of medical records for specific words linked to denials.
This creates additional pressure on human claims personnel. Adjusters know their jobs may be replaced by algorithms; as a result, they may become even more risk-averse and more inclined to uphold an AI-suggested denial. The longstanding culture within insurance companies, where employees are evaluated based on claim cost savings, intersects dangerously with automation.
How AI Reviews Your Medical Records: What LLMs Actually Do
Large Language Models (LLMs), including the technologies insurers are rapidly adopting, work by ingesting enormous volumes of data and identifying statistical patterns. They do not “think” or “understand” in the human sense. Instead, they learn which words, phrases, or medical codes often correspond to claim denials or approvals in historical datasets.
This presents several concerns:
Exponential Reading Power
AI can review thousands of pages of medical records faster than any human ever could. While this may seem beneficial, the purpose is often not to fully understand your condition—it is to locate denial-supporting language, sometimes taken out of context.
Pattern-Based Conclusions
If a model has been trained to treat certain diagnoses as questionable, such as fibromyalgia, chronic fatigue syndrome, Lyme disease, or other “invisible illnesses,” it will flag those claims more aggressively than others. Claimants with these conditions already face uphill battles with insurers; AI simply accelerates the denial process.
Bias In, Bias Out
What is the system being “trained upon”? If historical data includes biased or unfair denial patterns (and it almost certainly does), the AI will learn and replicate those patterns. The system becomes a high-speed reproduction of prior errors, now supported by the veneer of “objective technology.”
AI Hallucinates—And This Can Cost You Your Benefits
AI “hallucination” is the term used when a model produces an output that is confident but completely incorrect. These errors arise because the AI is predicting likely text—not verifying factual accuracy.
In claims handling, hallucinations may result in misinterpretation of medical terminology, creation of nonexistent inconsistencies in your medical records, incorrect summaries of physician notes and completely fabricated conclusions about your functional abilities.
Just as early GPS systems sometimes directed drivers into lakes, AI can and does make serious mistakes. The danger is that these mistakes now influence multi-thousand-dollar benefit decisions.
A Lack of Transparency: You Won’t Be Told AI Was Used
Under the Employee Retirement Income Security Act (ERISA), insurers are required to explain the reason for a claim denial. However, anyone who has read an ERISA denial letter knows these explanations are often vague: “insufficient medical evidence,” “not compliant with treatment,” or “lack of objective findings.” These statements often bear little resemblance to reality.
Even more troubling, there is currently no requirement for insurers to disclose whether AI was used in reviewing your claim.
You will not receive a denial letter stating:
- “Your claim was reviewed by an AI-driven assessment tool.”
- “Your medical records were analyzed by a large language model.”
- “An algorithm recommended denial.”
Regulators have not yet addressed AI transparency in insurance, and the industry’s powerful lobbying presence in Washington means meaningful restrictions are unlikely in the near future. In other words, a computer may be reviewing the most important claim of your life without your knowledge or consent.
AI Cannot Distinguish Between People—And That Matters
AI systems analyze patterns; they do not understand individual lived experience. They cannot distinguish between two claimants who share a diagnosis but have dramatically different functional limitations.
Two people may have identical MRIs showing lumbar nerve compression. One may manage a desk job with minimal discomfort, while the other may be unable to sit or stand for more than a few minutes without excruciating pain.
A trained physician or experienced attorney understands that disability depends on functional impact, not merely diagnostic codes. AI does not. Its conclusions are based on statistical averages, not individualized medical reality. This creates a substantial risk that legitimate, nuanced disability claims will be swept aside because the claimant does not match the algorithm’s notion of what “typical disability” looks like.
If You Filed a Claim Recently, AI May Already Have Reviewed It
Anyone who has filed a disability claim in the last year or who plans to file one soon should assume that AI is involved in the review process. At minimum, your medical records or claim forms may have been pre-screened or summarized by algorithm before reaching a human adjuster.
This is not necessarily disclosed, and presently, nothing requires insurers to reveal it.
Can You Fight Back? Absolutely. But You Must Be Prepared.
You do not need to be Linda Hamilton in The Terminator to push back against an AI-driven denial, but you will need to be systematic, persistent, and well-informed.
Here are steps that can help:
- Demand Your Entire Claim File Under ERISA and state laws, you have the right to your complete claim file, including internal notes, medical reviews, and any documentation the insurer used. While AI outputs may not be clearly labeled, inconsistencies or templated language may reveal algorithmic involvement.
- Strengthen Medical Documentation Ask your physicians to provide detailed functional assessments—not just diagnoses. Specific measurements of limitations (lifting, sitting, bending, endurance, cognitive ability) undermine algorithmic assumptions.
- Challenge Incorrect or Misleading Summaries AI-generated summaries often misquote or oversimplify medical records. These errors can and should be challenged in your appeal.
- Consult an Experienced Disability Attorney AI-related denials require meticulous review and strategic rebuttal. A knowledgeable attorney can identify patterns of unfair claim handling and present evidence in a manner that forces the insurer to reevaluate.
AI is reshaping the insurance landscape, often to the detriment of claimants. While the technology may eventually improve, its current use introduces significant risks: misinterpretation of medical records, overreliance on flawed datasets, algorithmic bias, and lack of transparency.
If you are filing a disability or health claim, assume AI is part of the process—and prepare accordingly. If your claim is denied, do not accept the decision at face value. You can push back, and in many cases, you can win. Call our office to speak with Jason Newfield about your long term disability claim.
