Zohaib Zahir
Associate Editor
Loyola University Chicago School of Law, JD 2027
The rapidly growing use of artificial intelligence (AI) has resulted in corporations having to find the balance between regulation and efficiency, and the world of insurance is no exception. As part of this transformation, insurance companies such as UnitedHealth Group and Humana have integrated AI into their claims evaluation system as a tool to process claims efficiently. UnitedHealth Group states that AI can better analyze data, process claims, detect fraud and provide more effective customer service. However, critics challenge this assessment, citing bias and privacy concerns. During the 2025 legislative session, Illinois pushed to regulate insurance agencies operating in the state through Illinois House Bill 0035. However, the legislation stalled in the Illinois Senate and did not advance during the 2025 legislative session.
Exploring Illinois House Bill 0035 and its legislative journey
Illinois House Bill 0035 outlined multiple key provisions designed to regulate the use of AI in insurance. First, the bill mandated a human oversight requirement. This requirement obligated insurance companies to implement a system of meaningful review by a human anytime there was an adverse decision made solely using AI. Adverse decisions included denial, reduction, or termination of insurance plans or benefits. Next, the bill granted regulatory oversight to the Illinois Department of Insurance (IDOI). IDOI was granted the authority to oversee the use of AI systems, including the ability to investigate the development and investigation of the AI system. Lastly, the bill mandated transparency and disclosure, requiring insurers to disclose their use of AI in their review system.
The 2025 Illinois legislative session was held from January 8, 2025, to May 31, 2025. Upon conclusion of the legislative session, any legislation not passed by both the Illinois House and the Illinois Senate would be considered expired and would have to be reintroduced in a subsequent session to be reconsidered. Illinois House Bill 0035 passed the Illinois House on April 9, 2025, but stalled out in the Illinois Senate until the end of the legislative session.
Speculation on why Illinois House Bill 0035 stalled
The specific reasons detailing why House Bill 0035 stalled have not been disclosed. However, one can consider a few factors that could have impacted the progress of the legislation. First, AI is a rapidly growing technology with applicability across a variety of different sectors, including insurance. With this continued growth, uncertainty remains on how exactly AI will be used in the world of insurance. It is within reason to infer that Illinois lawmakers chose to delay regulatory action until the use of AI in insurance became more clearly defined. Second, as previously mentioned, disagreements among stakeholders regarding AI’s benefits within the insurance sector remain. Insurers such as UnitedHealth Group cite improved efficiency and cost reduction as key benefits for the use of AI within the insurance sector. Critics emphasize privacy concerns and a need for transparency. No doubt, these disagreements could have caused hesitation among Illinois lawmakers.
Striking a Balance Between Progress and Regulation
There is little doubt that AI will play a pivotal role in shaping the future. However, the use of AI must be carefully regulated to prevent disproportionate harm to certain groups or individuals. The need for this oversight is only emphasized when considering the significant leverage insurance corporations hold over consumers. Among consumers it is widely felt that insurance corporations are not trustworthy and claim denials are made without transparency or fairness. If you add into consideration that biased or incomplete data can be used by AI systems during the review process, it will only exacerbate such negative consumer perceptions. Thus, regulation is necessary to ensure fairness and accountability. However, regulation should not be so restrictive that it stifles progress. Ultimately, a balance must be struck to ensure fairness to all stakeholders and to ensure progress continues. Illinois House Bill 0035 represented Illinois lawmakers’ attempt to strike a balance between progress and regulation. However, with the bill’s failure to pass, it remains to be seen what future course of action Illinois lawmakers take to regulate AI within the insurance sector. Given the pace of innovation, Illinois lawmakers are likely to revisit the need for regulation in future legislative sessions with the intention of passing legislation that strikes a balance between accountability and progress.