State insurance regulators launched the first formal government examination of how insurers use artificial intelligence to make claims decisions this month, targeting the tools that determine total-loss thresholds, assess damage, and set parts valuations — decisions collision repair shops receive and are expected to work within.
The National Association of Insurance Commissioners developed the program through its Big Data and Artificial Intelligence Working Group. It requires insurers in 12 participating states to submit their AI systems for regulatory review. In a survey, the NAIC found that 88% of auto insurers currently use or plan to use AI to evaluate claims.
The regulatory push comes as the pool of insured repairable work at collision repair shops has been contracting. Repairable claims were down 10.4% through August 2025 compared to the same period the year before, and total-loss frequency reached 22.8% through October 2025, on pace for a second consecutive record, according to CCC Intelligent Solutions data.
12 states participating, national rollout targeted for November
The participating states are California, Colorado, Connecticut, Florida, Iowa, Louisiana, Maryland, Pennsylvania, Rhode Island, Vermont, Virginia, and Wisconsin. The pilot runs through September 2026.
Participating states will meet monthly to share findings, and the tool will be revised based on pilot results before being submitted for public review. A nationwide rollout is targeted for the NAIC's fall meeting in November 2026.
What regulators are examining
The program’s AI Systems Evaluation Tool covers four areas: how extensively an insurer uses AI, how those systems are governed internally, details on systems regulators classify as high-risk, and specifics on the data those systems rely on. Regulators have said they will prioritize AI systems most likely to produce consumer harm, applying less scrutiny to back-office automation.
One provision is directly relevant to disputed claims: insurers are required to take full responsibility for AI platforms purchased from third-party vendors. The NAIC's stated position is that existing insurance laws apply to AI-driven decisions the same way they apply to decisions made by human adjusters.
"AI is a tool used in underwriting, pricing, claims, fraud detection," the NAIC wrote in a March 2026 Issue Brief. "Existing state insurance laws apply regardless of whether decisions are made by humans, algorithms, or third-party vendors."
NAIC President Scott White, speaking at the organization's 2026 Spring National Meeting in San Diego, said regulators "don't want to stand in the way of innovation that generally serves consumers" but want AI used "transparently, fairly and in ways that hold up to scrutiny."
Insurers are pushing back on program
The insurance industry has formally objected to the pilot's structure. A joint letter from trade groups representing multiple types of insurers was filed in December 2025, arguing that the program is "voluntary for regulators while compulsory for companies" and that carriers could face penalties based on findings from a tool that had not yet been finalized.
The pilot launched despite those objections, with a fourth version of the tool released ahead of the March 2 start date. The tool will be refined in September and October based on pilot findings before going to a public review period. The NAIC has scheduled a vote on nationwide adoption for its November 2026 fall meeting.
