How Insurance Fraudsters are Using AI – What Insurers Need to Know

While artificial intelligence is helping insurers detect and prevent fraud with unprecedented accuracy, the technology is a double-edged sword. Criminals are also leveraging AI to commit more sophisticated, scalable, and harder-to-detect forms of fraud. As insurers invest in smarter detection, fraudsters are evolving their tactics, too.

We examine how fraudsters are utilising AI, the emerging threats it poses, and how the insurance industry can effectively respond.

Deepfakes and Synthetic Media

AI-generated videos, images, and audio, commonly referred to as deepfakes, are becoming increasingly realistic and accessible. Fraudsters can now create fake accident footage, falsified witness testimonies, or even replicate a claimant's voice during a phone call with a claims handler.

For example, a fraud ring could submit a video of a staged accident involving fake number plates, fake voices, and AI-generated injuries to support a bogus claim. Traditional verification methods like image inspection or phone interviews may not be sufficient in this scenario, meaning insurers need new tools to validate the authenticity of media and audio content.

Synthetic Identities

With AI tools, criminals can now create synthetic identities, which are entirely fabricated personas built from a mix of real and fake data. These identities can be used to take out policies, submit claims, and launder money through the insurance system.

Insurers now need more than basic ID checks. Cross-referencing behavioural patterns, digital footprints, and biometric data may become essential.

AI-Powered Document Forgery

AI can now generate authentic-looking documents - from bank statements and driving licences to repair invoices and doctor's notes. Many of these forgeries are virtually undetectable to the naked eye.
If a fraudster submits a claim for water damage supported by fake invoices from a repair company, all generated using an AI document tool that mimics real branding, language, and formatting. This is why insurers must go beyond visual checks. Using AI to verify supplier databases, invoice formats, and writing style patterns can help identify synthetic content.

Automated Social Engineering and Chatbots

Just as insurers use chatbots to engage with customers, fraudsters use AI-powered bots to automate scam emails, phishing attempts, and even real-time manipulation of customer service agents.

Consider that an AI chatbot mimics a genuine claimant and engages with a call centre agent to extract information or subtly manipulate the claims process. In efforts to combat this, training staff to detect AI-generated social engineering and equipping systems with bot-detection tools is now essential.

Reverse Engineering Fraud Detection Systems

As insurers adopt AI to detect fraud, criminals are trying to reverse engineer these models. By submitting multiple claims and observing which ones get flagged, they can identify patterns in the algorithm and learn how to bypass it.

One example of this could be an organised fraud ring testing different combinations of claim details, such as adjusting timing, claim size, or incident description, to work out which variations trigger a fraud review. As an insurance provider, fraud detection models must be adaptive and regularly updated. Insurers should implement anomaly detection and avoid relying solely on static rule-based systems.

AI-as-a-Service for Fraud

AI tools that were once complex and expensive are now widely available via open-source platforms or "AI-as-a-service" websites. Fraudsters can use these tools to generate fake documents, scripts, identities, or even business models for criminal operations.

What Can Insurers Do?

Insurers can't afford to only play defence, they also need to stay ahead of AI-driven fraud, which could mean actions such as;

• Invest in AI-based countermeasures , including image forensics, voice biometrics, and behavioural analytics.
• Train staff to spot red flags of synthetic claims, social engineering, and deepfake content.
• Collaborate across the industry , sharing intelligence and emerging threats.
• Implement continuous model training , not just rules-based logic.
• Ensure human oversight to verify claims that pass AI screening, especially those involving high payouts or unusual circumstances.

It has become a tool of choice for fraudsters, but it doesn't have to give them the upper hand. With the right investment in technology, people, and processes, insurers can defend themselves against these emerging threats and even turn the tables by using AI to outsmart the fraudsters.

Staying informed and agile will be critical as both sides of the fraud fight become increasingly powered by machines.