Artificial Intelligence and Automated Insurance Decisions: Legal Implications in Global Markets

Abstract

Background: The increasing adoption of Artificial Intelligence (AI) in the insurance industry has revolutionized underwriting, claims processing, and fraud detection. While AI-driven automation enhances efficiency, it also raises critical legal and ethical concerns regarding algorithmic bias, transparency, and liability. Inconsistencies in global regulatory frameworks further complicate the legal landscape, leaving policyholders vulnerable to unfair claim denials and discriminatory decision-making.
Objectives: This research investigates the legal implications of AI-powered insurance decision-making. It examines the extent to which existing insurance laws accommodate AI-based underwriting, focusing on liability issues, policyholder rights, and regulatory compliance in different jurisdictions.
Methodology: The study utilizes a comparative legal analysis, evaluating insurance laws from Montenegro, Laos, and major AI-regulating regions like the European Union. It also reviews AI-related legal cases to identify precedents in insurance disputes. Insights from industry professionals, legal experts, and policyholders provide a holistic view of the challenges and opportunities presented by AI-driven insurance models.
Findings: The research reveals significant gaps in legal accountability, particularly regarding algorithmic bias and transparency. It calls for stronger regulatory oversight, mandatory explainability standards for AI-driven decisions, and international cooperation to ensure ethical AI deployment in insurance.