Insurance fraud in the United States costs consumers an estimated $308.6 billion a year, and artificial intelligence is making it worse – and harder to detect.
Data and AI firm SAS warned in a report that generative AI tools now allow virtually anyone with a computer to create or alter images for the purpose of filing fraudulent insurance claims. Fake photos depicting crash scenes, damaged furniture, and altered receipts are among the materials fraudsters can produce in seconds, the company said.
About one in 10 property-casualty insurance losses already involves fraud, SAS said. The growing accessibility of AI image-generation tools threatens to push that figure higher by lowering the technical skill required to fabricate convincing evidence.
Insurance fraud specialist Adam Hall conducted a demonstration showing how generative AI could be used to produce believable crash scenes almost instantly – closely mirroring tactics that fraudsters and organized crime groups are already using against insurers.
The threat extends beyond staged accidents. In one documented case, a major short-term lodging rental company discovered that a host had used digitally manipulated images to falsely accuse a renter of causing thousands of dollars in damage.
Despite the scale of the problem, the industry appears largely unprepared. A joint survey by the Association of Certified Fraud Examiners and SAS found that only 7% of anti-fraud professionals said their organization is more than moderately prepared to detect or prevent AI-driven fraud. Among insurance industry respondents, none expressed more than moderate confidence.
“With just a few prompts, fraudsters can use generative AI tools to create, enhance, or erase visual evidence to support a false insurance claim,” said Franklin Manchester, principal global insurance advisor at SAS. “Once you see how easy it is to create a forgery or manipulate an image, the scope of the problem becomes glaring.”
Manchester added that AI also presents a path forward for insurers. “It can not only analyze huge volumes of claims data, but it can also detect anomalies in images that humans simply cannot,” he said.
