How California’s New AI Law Is Changing Insurance Decisions
Residents in Chino and across Southern California are seeing a major shift in how their healthcare and insurance claims are handled. As technology evolves, many insurance companies have begun using artificial intelligence (AI) and automated algorithms to process claims, often in the name of efficiency. But for many people, this shift has meant receiving a denial letter from a machine rather than a human being.
To address these concerns, California recently enacted Senate Bill 1120, also known as the Physicians Make Decisions Act. This law, which took effect on January 1, 2025, establishes strict limits on how insurance companies can use AI when deciding whether to approve or deny medical care. If you live near Chino Hills or throughout the Inland Empire and have felt that an automated system unfairly denied your claim, it is vital to understand how these new protections work.
The Role of Human Oversight in Insurance Reviews
The primary goal of SB 1120 is to ensure that a computer program never has the final word on your health. Under the new California Insurance Code and Health and Safety Code provisions, any decision to deny, delay, or modify a request for medical services based on medical necessity must be made by a human being. Specifically, this person must be a licensed physician or a qualified healthcare professional with expertise in the clinical issue at hand (California SB 1120).
This legal precedent stipulates that while an insurance company can use AI to sort through data or flag certain files, the technology cannot supplant a doctor’s judgment. If an algorithm suggests that a treatment is unnecessary, a licensed professional must still review your specific medical history and clinical records before a final denial is issued. This protection helps prevent situations in which a generic dataset is used to deny care to someone with a unique or complex medical condition.
Prohibiting Discrimination and Unfair Bias in Algorithms
One of the biggest risks with AI in the insurance industry is algorithmic discrimination. Algorithmic discrimination occurs when a software tool unintentionally disfavors certain groups of people based on factors like race, age, or disability. California law now explicitly prohibits health insurers from using AI tools that discriminate against insured individuals, either directly or indirectly (California Department of Insurance).
Insurers are required to apply these technologies fairly and equitably. These legal protections are a significant safeguard for our neighbors in Chino, as they require insurance companies to be more transparent about the criteria they use. The law also mandates that these automated tools must not cause harm to the insured person. If an insurance company uses a flawed algorithm that results in the denial of surgery or life-saving medication, it could be held accountable for the resulting physical and financial damages.
Your Right to Transparency and Fair Treatment
Beyond health insurance, California is also moving toward broader transparency through additional regulations on “consequential decisions,” including access to insurance, employment, and housing. Under these evolving rules, Californians have the right to know when an automated decision tool is being used to make a significant decision about their lives (California AB 2930).
- Notification: You should be notified if AI is a substantial factor in a decision affecting your insurance coverage
- Correction: You have the right to correct any incorrect personal data that an AI tool may be using
- Opt-Out Options: In some cases, if a decision is made solely by an automated tool, you may request a human-led alternative process
New Transparency Standards and AI “Impersonation” Bans
As of 2026, California has expanded these protections through additional statutes, such as AB 489. This law addresses “AI impersonation” by prohibiting developers from using titles, icons, or language that falsely suggest a licensed healthcare professional is overseeing an AI system’s output when they are not (California AB 489). This law ensures that when you see a “doctor’s signature” or a medical seal on a claim decision, a real person actually conducted the review.
Furthermore, insurers must now provide clear disclosures when generative AI is used to communicate with patients. These layers of transparency allow you to verify whether your claim was handled with the personalized attention required by law. If an insurer uses an algorithm that fails to consider your specific clinical history, they are in direct violation of the standards set by the California Department of Managed Health Care (DMHC).
How These Laws Impact Personal Injury Claims
At The Paris Firm, we often see how insurance company tactics affect people recovering from serious accidents on the 60 Freeway or Central Avenue. When you are filing a personal injury claim after a car crash or a slip and fall, the opposing insurance company might use automated tools to calculate settlement values or to flag your medical treatments as excessive.
These new laws provide a framework for challenging those automated denials. If an insurance company uses a “black box” algorithm to claim that your physical therapy isn’t necessary, we can point to these statutes to demand human accountability. The law requires that decisions be based on your individual medical records and circumstances, not just a group dataset or a typical case profile (California Insurance Code Section 10123.135).
Navigating the Legal Path Forward in Chino
The legal landscape regarding AI and insurance is complex and constantly changing. If you believe your rights have been violated or an automated system has unfairly delayed your medical care, you do not have to face the insurance giants alone. We understand the stress of dealing with insurmountable medical expenses and the frustration of feeling like a number in a system.
Our team is dedicated to getting results for our clients and providing a high level of personal service and respect. We take the time to listen to your concerns and explain the legal process in plain English. Since 1994, attorney Eric D. Paris has been fighting for the rights of the injured in California, ensuring that our clients receive the attention and integrity they deserve. If you have questions about how a recent insurance decision was made, call The Paris Firm at 909-325-6185 to schedule a consultation at our Chino Hills office.
