Rob Schumacher, Co-Founder and CEO at Feather
The insurance industry is being submerged in fraud. Wave after wave of fraudulent claims are crashing into the sector, with insurance fraud rising by a staggering 211% since 2017. Recent research found one in seven UK insurance claims prove to be fraudulent and the average cost of a fake claim is as high as £84,000. With the rise of AI deepfakes and ever-sophisticated technology in the hands of fraudsters, insurance companies are fighting a relentless battle against financial crime.
However, though the battle is tough, the outcome isn’t definite. As much as new technology enables insurance cheats, it’s simultaneously helping companies get swifter and smarter in spotting crime. With the right tools and the right strategy, insurance companies won’t have to sink but swim.
The Current State of Insurance Fraud
Insurance fraud is rocketing. As the cost-of-living crisis eats away at people’s livelihoods, fudging the insurance system has become an increasingly attractive option. Fraud is often – falsely – viewed as a ‘victimless’ crime: recent research has found that nearly one in two (48%) UK adults believe it is ‘reasonable’ to commit first party fraud.
But the surge in fraud goes far beyond one-off opportunities. Powered by the proliferation of sophisticated technology and the growth of AI, insurance fraud is now a fully fledged industry, creating deepfake documents and synthetic identities with ease, and even leveraging bot-driven fraud networks to drive crime. Synthetic voice fraud attacks on insurance companies jumped up 475% in 2024 and the practice of ‘ghost broking’ is earning criminals thousands, while defrauding vulnerable young motorists.
It’s not just the sophistication and complexity of insurance fraud schemes that’s worrying. Perhaps the most frightening aspect of the rise of insurance fraud is its accessibility. Tools to scam insurers are available on Telegram in a matter of minutes, so anyone can try their hand at financial crime. The barrier to entry has been kicked down.
How Technology like AI Tackles the Rise of Insurance Fraud
What’s emerged now in insurance is a technological arms race: criminals and insurers both rushing to use the latest tools to outsmart the other. Yet as much as sophisticated technology is helping criminals create more convincing schemes, it can also be used to fight back. Artificial intelligence and predictive analytics are now non-negotiables for insurers in flagging suspicious claims, with businesses using AI tools to continuously scan for anomalies across claims data, user behaviour, and document structures. Such tools can spot subtle patterns in seconds that humans may miss in hours, freeing up time for insurance investigators to focus more fully on complex cases. We’re already beginning to see the results: in September it was revealed that a new artificial intelligence tool had helped the UK government recover almost £500m over the last year.
The Importance of Human Involvement
This isn’t to say everything should be handed over to AI. Insurers will combat fraud by combining emerging tools with human effort. Even the most advanced models currently need a helping hand analysing the behavioural red flags, emotional cues in writing, and timing mismatches that all come together to tell the story of a claim. Ethics, oversight, and context remain crucial with any AI use and these processes must be overseen by humans, who should be looped in continually in AI-led evaluations.
This means businesses must ensure they’re comprehensively training employees, both in effectively using these new tools and in spotting issues for themselves. Employees should be confident they can identify red flags, inconsistent documentation, or excessive claims, bringing their own skills and judgement to fully assess a claim.
The storm of fraud may be strong but insurers aren’t defenceless. Fraudsters aren’t the only ones who can make use of artificial intelligence and sophisticated tech has become a lifeline for insurers facing a barrage of claims. With the right technology, and an approach that blends human judgement with AI incisiveness, insurers can level up fraud detection and resist criminal claims.