Increasingly sophisticated artificial intelligence (AI) tools are accelerating insurance fraud at a pace that is reshaping claims, trust, and pricing across the industry, according to new research and commentary from Verisk.
Shane Riedman (pictured), president of anti-fraud analytics at the data analytics firm, told Insurance Business the convergence of widespread AI tools and shifting consumer attitudes, especially among the younger generations, has created a “perfect storm” for insurers. This dynamic, he said, is already driving operational changes and could significantly impact policyholders.
Verisk’s latest State of Insurance Fraud study found that 55% of Gen Z respondents would consider altering claim evidence, compared with just 12% of baby boomers. Across all age groups, more than one-third of consumers said they would consider digitally modifying claim materials.
“What was really shocking was seeing that number at more than half of Generation Z,” Riedman said of the study. “We would have expected something closer to 10% or the teens.
“What we’re seeing is that the wide proliferation of AI tools, and the ready availability of those tools, is arming the average Gen Zer to be able to very quickly and easily – and, in their minds, somewhat innocently – commit insurance fraud. It’s the combination of those two things – the willingness and the availability of the tools – that is creating a lot of fear and anxiety in the insurance market today.”
The research highlights what Riedman describes as an “ethics gap,” where everyday use of AI editing tools (like adjusting lighting or removing elements from images) has blurred the line between acceptable behavior and fraud.
Nearly half of consumers who have used AI editing tools said their results looked “very realistic,” while 62% believe AI is already frequently used to manipulate insurance claims.
The impact is tangible for insurers. Verisk found nearly all carriers surveyed (98%) said AI-powered tools are fueling a rise in digital fraud, and 76% reported that manipulated claims have become more sophisticated in the past year.
Riedman warned that many consumers do not fully understand the broader consequences of these actions. “We’re doing a poor job as an industry educating people about the importance of insurance,” he said. “When someone inflates a claim or fabricates evidence, they’re not just affecting an insurer, they’re impacting their neighbors and the broader system.”
Despite heavy investment in AI-powered fraud detection, insurers are locked in a continuous battle with fraudsters. Early deepfake detection systems have achieved near-perfect accuracy, according to Riedman, only to be quickly surpassed by evolving fraud techniques.
The challenge is compounded by the broader technology landscape. Consumer-facing AI tools developed by companies such as OpenAI, Google, and Meta are widely accessible and increasingly sophisticated, lowering the barrier to entry for would-be fraudsters.
Even collaborative efforts, such as embedding watermarks in AI-generated images, have proven difficult to enforce, as bad actors find ways to bypass safeguards.
“This isn’t just insurers versus individual fraudsters,” Riedman said. “We’re effectively up against an entire ecosystem of rapidly evolving technology.”
The rise in AI-driven fraud is expected to have ripple effects across the insurance ecosystem, particularly for brokers and their clients.
According to the study, 69% of consumers believe fraud will ultimately lead to higher premiums. Riedman agreed, noting that increased claims costs and fraud detection investments will inevitably be passed on.
“Property and casualty insurers operate on very thin margins,” Riedman said. “When you increase costs on the claims side, that money has to come from somewhere… and it typically comes from premiums.”
Beyond pricing, customer experience is also set to change. As trust in submitted evidence declines, insurers are introducing additional layers of scrutiny, which could slow claims processing and increase friction. Riedman said carriers are increasingly shifting toward structured, app-based claims workflows, where documents and images are submitted through controlled environments that enable real-time fraud checks.
“There’s going to be more skepticism around every claim,” Riedman said. “Even legitimate claimants will feel that through longer processing times and more reviews.”
With no single company able to solve the issue alone, insurers are increasingly calling for greater collaboration and data sharing. Riedman said carriers are recognizing the need to pool intelligence, including known fraudulent images and claims patterns, to stay ahead of organized schemes.
“We believe strongly that technology on its own is not going to solve the problem. But when you bring them all together – multiple carriers, multiple technologies, and multiple vendors who are all aiming to defend the market – that’s where we find strength,” he said. “We also have to recognize that the bad actors are communicating with each other. There are open forums where they share technology and techniques for defrauding insurers.”
There is also a growing role for brokers in combating fraud, particularly through client education and carrier selection. Brokers need to help customers understand the risks and the broader impact of fraud, said Riedman: “It should be part of the conversation, just like any other risk exposure.”
Amidst this shift, brokers and agents can differentiate themselves by incorporating anti-fraud considerations into their advisory services and steering clients toward carriers with strong fraud detection capabilities.
“I don’t think we consistently see that in the broker world. Traditionally, it has been risk assessment and delivering a solution,” Riedman said. “But I think going one step further with education, ensuring customers are fully aware of the risks and understand some of the defenses their carrier is putting into play, is crucial.”
