AI Failure Index
AI Failures in Insurance
Insurance AI failures touch underwriting, claims, and customer comms. Each surface has its own failure mode.
- Incidents
- 11
- Highest severity
- Catastrophic
- Sources cited
- 30
- Newest indexed
- Jun 5, 2026
Pennsylvania AG settled with GEICO over AI underwriting tied to improper policy cancellations
Pennsylvania Attorney General Dave Sunday announced a settlement with GEICO on May 22, 2026, after an investigation found the insurer's AI tool for selecting new policyholders for underwriting review caused customer confusion and unfair policy cancellations. The AI selected a policyholder for review who submitted documents she believed were adequate, but GEICO failed to inform her the submission was insufficient and cancelled her policy without adequate notice, leaving her unknowingly driving uninsured. GEICO agreed to extend document submission deadlines, reduce verification requirements, and align with state AI guidance without admitting any violation of law.
- Confidence
- High (multi-source, primary)
Anthem Blue Cross E/M claim-review policy criticized by CMA
In December 2025 the CMA publicly urged Anthem Blue Cross to rescind a newly announced evaluation-and-management (E/M) claim-review policy, alleging the payer failed to disclose the criteria, methodology or algorithms it would use to adjudicate E/M claims. Anthem’s provider communications (company source) state the payer will review selected E/M claims prior to payment to determine correct coding and reimbursement. The CMA framed its concern as a transparency and patient-care issue and sought policy withdrawal and legislative remedies.
- Confidence
- High (multi-source, primary)
Elderly Black homeowners sued State Farm over AI they allege discriminated in claims handling
Gregory and Annette Kelly filed a federal lawsuit in the Middle District of Alabama on October 1, 2025, alleging State Farm used what the complaint called 'cheat and defeat AI algorithms' to subject their homeowners insurance claim to heightened scrutiny based on their race and disabilities. The plaintiffs, elderly Black and visually impaired residents of Montgomery, Alabama, sought $372,437.36 in damages for lightning and water damage they claimed State Farm wrongfully delayed. The case was dismissed without prejudice on December 15, 2025 for failure to comply with court orders and failure to prosecute, not on the merits of the discrimination claims.
- Confidence
- High (multi-source, primary)
HCIactive data breach exposes over 3 million records from AI-insurance software
AI-powered insurance software provider HCIactive suffered a data breach in July 2025, resulting in the potential exposure of over 3 million records. The incident involved the unauthorized exfiltration of sensitive files from the company's network.
- Confidence
- High (multi-source, primary)
Texas AG sues Allstate and Arity over alleged unlawful collection and sale of driving data
The Texas Attorney General filed a lawsuit against Allstate and its subsidiary Arity, alleging unlawful collection, analysis, and sale of driving data from over 45 million Americans without proper notice or consent. The action centers on a lack of transparency in Arity’s data collection pipeline and consent mechanisms, with multiple independent sources corroborating the filing.
- Confidence
- High (multi-source, primary)
UnitedHealth's nH Predict algorithm allegedly drove wrongful denials of elderly care
A class action alleges UnitedHealth used an algorithm called nH Predict to cut off post-acute care for elderly Medicare Advantage patients in bad faith, despite knowing it was wrong: more than 90% of its denials were reversed on appeal. A federal judge allowed core claims to proceed in 2025.
- Confidence
- Medium (multi-source)
Cigna's PxDx system let doctors reject 300,000 claims in two months without reading them
A ProPublica investigation found Cigna used a system called PxDx to automatically flag mismatched claims for bulk denial, letting its medical directors reject about 300,000 claims over two months, an average of 1.2 seconds each, without opening patient files. Lawsuits and a congressional inquiry followed.
- Confidence
- Medium (multi-source)
A suit alleges State Farm's fraud-detection AI disproportionately flagged Black homeowners' claims
In Huskey v. State Farm Fire and Casualty Co., filed December 14, 2022, two Black homeowners alleged that State Farm's machine-learning fraud-detection algorithms assigned higher risk scores to Black policyholders using race-correlated proxy inputs, routing their claims into heightened scrutiny and causing significant delays. The complaint cites evidence that Black policyholders were 39 percent more likely to submit extra paperwork, while white homeowners were nearly a third more likely to have claims processed within a month. The court denied State Farm's motion to dismiss the disparate impact claims in September 2023, and discovery remains ongoing.
- Confidence
- High (multi-source, primary)
UnitedHealthcare sued over automated algorithm delaying emergency claims
TeamHealth alleged that UnitedHealthcare used an automated algorithm to routinely deny or delay payments for emergency services based on diagnosis codes. The lawsuit claims these actions violate federal law and lead to systemic underpayment of providers.
- Confidence
- Medium (multi-source)
Lemonade faces a class action over collecting biometric facial data from claim videos
A putative class action alleged that Lemonade Inc. collected and stored facial geometry biometric data from customers who submitted video claims through its AI chatbot without providing required disclosures or obtaining written consent under the Illinois Biometric Information Privacy Act. The controversy erupted after Lemonade tweeted about its AI analyzing 1,600 data points from claim videos, prompting lawsuits in Illinois and New York. Lemonade ultimately agreed to a $4 million settlement covering over 110,000 affected policyholders and stopped collecting biometric data.
- Confidence
- High (multi-source, primary)
Lemonade drew outrage after tweeting its AI analyzed claim videos for 'non-verbal cues'
On May 24, 2021, Lemonade Insurance posted a Twitter thread stating that its AI analyzed customer claim videos for 'non-verbal cues' to detect fraud, drawing immediate condemnation from digital rights organizations, AI researchers, and disability advocates who called the approach pseudoscientific and comparable to phrenology. The company deleted the tweets within 48 hours and published a clarification blog post stating it did not use physical features to deny claims and that 'non-verbal cues' was a poor word choice. A class action lawsuit alleging biometric data violations was subsequently filed in August 2021.
- Confidence
- High (multi-source, primary)