A New Jersey bill would bar insurers from using artificial intelligence to make the final call on claim denials. 

Assembly Bill 5494, introduced on September 14, 2026, by Assemblyman Chris Tully of Bergen County, covers three personal lines - homeowner, automobile, and flood insurance. The bill's statement points to "inaccuracy, unfair discrimination, data vulnerability, and lack of transparency" as the risks AI poses to policyholders. 

The restriction is narrow. A5494 would not pull AI out of claims handling entirely. Insurers could still use automated tools for triage, assessment, fraud scoring, and approvals. What the bill would prohibit is letting an algorithm deliver the final "no" - the denial itself. The bill's statement describes this as "requiring a claims adjuster or investigator to review" denied claims, though the operative text frames the rule as a prohibition on AI making that last decision rather than an affirmative mandate for human review. 

That distinction matters. An insurer using AI to flag a claim for denial, then routing it to a human adjuster for sign-off, would appear to comply. An insurer whose automated system issues denial letters without a human in the loop would not. 

The bill defines artificial intelligence broadly: any data-trained system designed to simulate human communication through text, audio, or visual output that generates "non-scripted outputs with limited or no human oversight." That language is wide enough to catch large language models, chatbots, and automated decision engines. Where the boundaries fall on more traditional rules-based systems is less clear and would likely be tested if the bill advances. 

Penalties are set at up to $5,000 per violation, collected through summary proceedings under New Jersey's Penalty Enforcement Law of 1999. For a carrier processing thousands of claims, those per-denial fines could stack quickly. 

Commercial, life, health, and specialty lines sit outside the bill's reach. Only homeowner, auto, and flood policies are covered. 

A5494 is at its earliest legislative stage - introduced but not yet referred to committee, with no companion bill in the state Senate. Whether it advances remains an open question. 

For claims leaders and technology teams, the bill reflects a pattern now showing up in multiple statehouses: legislators drawing a line specifically at the denial decision, the point where policyholder harm is most tangible and where regulators are most likely to scrutinize insurer conduct. 

The legislation referenced in this article has been introduced but not enacted. Insurance Business presents all sides and welcomes responses from any party named or affected.