Pennsylvania AG Settles with GEICO over Use of Artificial Intelligence in Claims Handling

In May 2026, Pennsylvania Attorney General David Sunday announced a settlement with Government Employees Insurance Company (“GEICO”) arising from an investigation into the company’s use of an AI‑enabled underwriting review tool that resulted in the cancellation of an insured’s auto insurance policy without sufficient notice. The GEICO settlement signals increased regulatory scrutiny on AI‑assisted underwriting and automated decision‑making in insurance, particularly where such tools affect coverage continuity.

The matter originated from a complaint by a Philadelphia policyholder whose auto insurance was terminated by GEICO during its standard 60‑day review for new customers. GEICO’s AI tool flagged the applicant (now insured) for additional underwriting and a request for additional information. GEICO found the insured’s response insufficient and cancelled the policy. The consumer, however, continued to drive for some time under the mistaken belief that she was still insured.

The Attorney General alleged that the policy was cancelled “without adequate notice,” leaving the consumer “unknowingly uninsured and vulnerable to penalties and financial risk.” The Attorney General characterized the issue as not merely the result of GEICO’s use of artificial intelligence but its “unfair or confusing” insurance practices, particularly in how AI-enabled tools interacted with customer-communication and decision‑making processes. He expressed concern about the fairness and clarity of procedures, especially for potentially vulnerable consumers selected for review by algorithmic systems.

What’s in the GEICO AI Settlement?

Part of the settlement requires GEICO to adhere to Pennsylvania Insurance Department’s guidance on AI systems, which is based on the NAIC’s AI Model Bulletin. Such adherence requires:

• Any AI-supported decision impacting a consumer must adhere to all applicable state and federal insurance regulations.
• Insurers develop and maintain a formal AI governance program that outlines the acquisition, development, and use of AI systems, ensuring executive oversight and risk management.
• Insurers implement processes to detect and mitigate AI biases, ensuring that predictive models do not result in unfair discrimination against protected classes.
• Insurers using AI systems, algorithms, or predictive models developed by third-party vendors remain fully responsible for ensuring these tools comply with Pennsylvania insurance laws.
• Insurers disclose their use of AI systems and provide detailed documentation regarding their algorithmic models to the PID during examinations or investigation.

How GEICO Insurers May Move Forward

The GEICO settlement should be viewed by insurers not as an isolated enforcement action, but as a clear signal that traditional consumer‑protection and insurance‑law obligations fully extend to AI‑enabled processes. Regulators are unlikely to challenge AI use per se, but rather scrutinize whether automated systems produce outcomes that are opaque, inadequately communicated, or procedurally unfair, especially in high‑stakes decisions like coverage cancellation.

To steer clear of similar incidents, insurers should implement robust AI governance frameworks that align with NAIC‑style guidance—ensuring model decisions are explainable, documented, and subject to human oversight—while also strengthening end‑to‑end customer communication controls (e.g., clear notices, confirmation of deficiencies, and reasonable cure periods). In practical terms, insurers should treat AI outputs as regulatory decisions, not merely technical artifacts, embedding compliance, legal review, and auditability into every stage of the underwriting lifecycle.

Clark Hill’s Insurance and Emerging Technology practice regularly advises insurers and insurance-related technology-driven organizations on the complex legal and insurance regulatory challenges associated with the deployment of AI and related systems. By combining deep industry knowledge with practical regulatory insight, the team helps clients design, implement, and maintain AI processes that align with applicable statutory and compliance requirements, positioning them to innovate confidently while meeting evolving regulatory expectations.

This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this publication is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel. The views and opinions expressed herein represent those of the individual author(s) only and are not necessarily the views of Clark Hill PLC or Clark Hill Solicitors LLP. Although we attempt to ensure that postings on our website are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.