In 2026, artificial intelligence is no longer just a buzzword in the insurance industry. It is actively influencing whether families receive life insurance benefits.
Life insurers now rely heavily on AI for underwriting reviews, fraud detection, risk scoring, and even post-death claim evaluations. These systems can flag “inconsistencies” in medical records, reinterpret causes of death, or predict alleged misrepresentation faster than any human adjuster ever could.
The result is a sharp rise in automated denials issued at scale, often with minimal explanation. Beneficiaries are frequently left confused about why a claim was rejected.
We are also seeing widespread use of agentic AI, meaning autonomous systems that collect data, interpret policies, and recommend or issue denials with little routine human oversight.
Regulators have taken notice.
In late 2025 and early 2026, the National Association of Insurance Commissioners and multiple states rolled out new AI governance rules aimed at transparency, fairness, and meaningful human involvement. These changes create powerful new leverage for families challenging denied life insurance claims.
The NAIC’s Evolving AI Framework and What It Means for Denied Claims
The NAIC’s Model Bulletin on the Use of Artificial Intelligence Systems by Insurers, originally adopted in December 2023, has now been implemented or adapted by more than half the states as of early 2026.
Under this framework, insurers must maintain a formal AI governance program that includes:
Risk management designed to prevent adverse consumer outcomes such as unfair or unlawful claim denials
Transparency regarding how AI is used throughout underwriting and claims handling
Internal audits and controls to detect bias, errors, or discrimination
During 2025 and 2026, the NAIC Big Data and AI Working Group expanded these requirements by:
Piloting AI Systems Evaluation Tools so regulators can examine insurer algorithms during market conduct exams
Reinforcing that AI must support, not replace, human judgment in regulated insurance decisions
Emphasizing compliance with existing unfair claims settlement practices laws
For denied life insurance claims, this matters in very practical ways:
Insurers can no longer hide behind “the algorithm decided” as a black-box excuse
If AI played a role in flagging or denying a claim, the carrier must document its governance process, risk controls, and legal compliance
Beneficiaries, through counsel, can demand disclosure of how AI influenced the decision during appeals or litigation
These requirements create new discovery angles and new arguments in bad faith cases.
State “Human in the Loop” Laws Are a Game Changer
Several states went further than the NAIC’s principles-based approach by passing enforceable laws that take effect in 2026.
In Florida, HB 527 advanced in late 2025 and prohibits insurers from using AI as the sole basis for denying or reducing claims. A human reviewer must certify that AI was not the only decision-maker.
In Arizona, HB 2175 takes effect July 1, 2026. For health-related determinations, which often overlap with life and AD&D claims, licensed professionals must personally review and sign off on denials.
Similar transparency and human-review requirements have appeared in Texas, Maryland, and Nebraska, among others.
Although many of these statutes focus on health insurance, their principles extend directly to life insurance, especially group policies, accidental death claims, and cases involving medical causation.
If a life insurer used AI to:
Reclassify a death from accidental to natural in order to deny double indemnity
Flag alleged misrepresentation based on predictive modeling
Overemphasize minor medical history through automated review
these laws provide a strong basis to challenge the denial for lack of proper human oversight.
Bias in AI Is a Hidden Driver of Unfair Denials
AI systems learn from historical data, and that data often reflects past inequities.
If prior underwriting or claims practices relied on zip codes, occupation assumptions, or other proxy indicators, those same biases can be embedded into automated decision-making.
Regulators have raised concerns about:
Disproportionate denials linked to correlated demographic factors
AI systems over-flagging “contributing conditions” in ways that unfairly target certain groups
The NAIC explicitly ties AI governance to existing anti-discrimination laws. When biased modeling contributes to a denial, it can significantly strengthen claims for bad faith or unfair insurance practices.
What This Means for Beneficiaries Facing a Denied Claim in 2026
These regulatory changes give families real tools, not just abstract protections.
You can now:
Demand transparency by requesting the complete claim file, including any AI involvement, audit trails, and governance documentation
Challenge black-box denials by arguing that fully automated decisions violate human-review requirements
Raise bias or systemic error arguments when patterns suggest unfair targeting
Cite NAIC guidance and state mandates directly in appeal letters to force reconsideration
At Lassen Law Firm, we are already using these emerging standards to reopen and resolve denials where AI played a hidden role.
The regulatory shift in 2026 is changing the balance of power. Insurers can no longer rely on opaque algorithms without accountability.
If your life insurance claim was denied and you suspect AI involvement, or you simply want a second opinion, contact us for a free consultation. Strict deadlines apply for appeals and bad faith actions.
Call (800) 330-2274 or fill out our contact form. We handle cases nationwide and are ready to fight for what your family is owed.