AI-Generated Fraud on the Rise in Insurance Claims
Fake number plates, imaginary watches, and exaggerated damage have been identified in insurance claims generated using artificial intelligence (AI) technology.
Admiral, an insurer based in Cardiff, reported a 71% increase in fraud cases during 2025 compared to the previous year. The company partly attributes this surge to the growing use of AI software to manipulate evidence submitted in claims.
The Insurance Fraud Bureau has expressed significant concern about the proliferation of AI-generated claims and is investing in technology to counter this emerging threat.
Customers who fabricate or exaggerate claims risk having their claims denied, policies cancelled, and may face prosecution.
"This is a trend across the entire insurance industry,"said Haith, a member of Admiral's household claims team.
"We see AI that's been used to manipulate images to look like they've been damaged in a certain way, even to create and fabricate documents that were never there in the first place."
Due to the sensitive nature of their work, BBC Wales was requested not to use staff surnames.
Industry Collaboration and Detection Efforts
The broader insurance sector is collaborating to address the risks posed by AI, both from individual customers and organised crime groups.
Documents shared with BBC Wales reveal how AI has been employed to alter images and generate photos of items that do not exist. These manipulated images were submitted to Admiral as part of insurance claims but were identified by the insurer's fraud detection team.
Examples include a photo of a gold and diamond watch clearly generated by AI, as well as images where AI was used to exaggerate damage to the rear of a vehicle.
In another case, a car number plate was altered and repositioned to duplicate a claim.
All such attempts were detected, and the associated claims were rejected.
Despite the increase in AI-generated fraudulent claims, the insurance industry has responded by developing and deploying advanced detection systems.
"Although those tools are becoming readily available, we've also got some very good anti-fraud software that we use that can detect AI, detect whether something has been manipulated, and we're getting a lot better at detecting it across the market as well,"Haith added.
Concerns from the Insurance Fraud Bureau
John Davies, representing the Insurance Fraud Bureau, highlighted that opportunistic customers are using AI to inflate legitimate claims.
Organised crime groups are also leveraging AI to create fake documents, enhancing the efficiency of their fraudulent activities.
"The industry is heavily concerned about this and investing in technology,"Davies stated.
"It is a fast-moving issue, but I think what is positive is the collaboration across the industry, the understanding that it is a threat, but also there are opportunities there in how we can share knowledge and best practice to help use AI in a positive way."
Consequences for Fraudulent Claimants
Insurance premiums rise for all customers to cover the costs associated with fraud. Those caught cheating the system may face criminal charges.
"The ramifications are huge,"said Flora, part of Admiral's team responsible for assessing potentially fraudulent claims.
"I think people often don't realise that the results of what can happen afterwards can potentially be life-changing, for at least the short term."
In severe cases, fraud can lead to criminal convictions, Flora explained, but even without convictions, it can significantly complicate a person's life.
"It can make your life pretty difficult"she said,
"and it's simply not worth it."
