Unfair Claims Settlement Practices Act
NAIC Model 900, the model law on claim investigation and settlement conduct. Most AI claims exposure lands here rather than in any AI-specific statute.
The Unfair Claims Settlement Practices Act is NAIC Model 900, the model law setting standards for how insurers investigate and dispose of claims. It was split out of the Unfair Trade Practices Act in June 1990 precisely so that claims handling would be watched as a market conduct subject in its own right. Like every model law it is a template: states adopt, amend, or ignore it, so the operative text is always the state’s, and the model itself is careful to say it does not create a private right of action.
Two structural features decide how it applies to an automated workflow. Section 4 lists the conduct that counts, including misrepresenting policy provisions to claimants, failing to act promptly on communications, failing to conduct a reasonable investigation, and failing to explain a denial or a compromise offer. Section 3 then sets the threshold: an act becomes an improper claims practice when it is committed flagrantly in conscious disregard of the act, or when it has been committed with such frequency as to indicate a general business practice.
That second branch is the one AI changes. A single adjuster’s mistake is an incident. A rule inside a claims model that mishandles the same fact pattern every time it appears is, by construction, a general business practice, and it produces its own evidence at scale. The companion regulation for property and casualty claims, Model 902, is more concrete still: it requires claim files detailed enough to reconstruct how the insurer handled the claim, which is exactly the reconstruction an automated pipeline tends to lose. The clocks in that regulation start at first notice of loss, and the conduct rules for everything short of claims handling stay with the Unfair Trade Practices Act.