Modern Insurance Magazine


Data, Digital & AI in Insurance Fraud: Friend or Foe?


Data, Digital & AI in Insurance Fraud: Friend or Foe?

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Advances in AI and digital capabilities seem to pose unprecedented fraud threats for insurers.  This rapidly evolving technology now demands change in the way that we assess threat and take opportunities to mitigate insurance fraud.


As every ‘Big Kid’ (or parent of a comic-book-mad teenager) knows, a sliding scale is used to assess the threat level of villains based on two factors: how much danger they pose, and how effective they are. Within insurance, AI currently appears to afford more in terms of immediate fraud threat than it potentially does in business opportunities already seized, with adoption by villains far more advanced than that of our own defenses. From use in building synthetic identities and the enabling of voice cloning, through to creating perfectly fabricated claims documents, images, videos and other evidence, potential for abuse of AI feels like it’s already outstripping our own capabilities.

Remember, this is not just limited to the physical world, but in the very near future of the metaverse as well. So, in terms of villainy level, AI and digitally enabled insurance fraud should be considered a top-level ‘multiversal’ threat!

Here, we call out expectations on fraud leaders as this AI driven, digital threat landscape rapidly evolves.


If you build it, they will come

We need to support our business leaders in considering fraud threats, both now and in the near-future.

I recently spoke to a parametric insurer. They offered a robust (apparently fraud-proof) data driven and straight through claims process; from an indisputable event triggered by a data oracle, the claim is seamlessly processed through blockchain to reach a crypto settlement. Fast. Straight through. Encrypted. Immutable.

Which makes it immediately and inherently attractive to fraudsters, right? If the ‘cash out’ is big enough, the process will be targeted, and targeted with the full suite of weapons at the criminal’s disposal.

How do we know this? Take a moment to consider the far simpler world of organised motor claim fraud. We not only see wholly fabricated policies set up to facilitate claim fraud, but hacking-as-a-service and insider infiltration employed to steal claim data to enable farming and false claims.

So, even in this most modern world of insurance, insurance fraudsters will seek to exploit this most digital of processes – from the insertion of fabricated policyholders, to cyber manipulation of data and insider infiltration.

Our role as fraud leaders must therefore be to support our senior business leaders in an honest, probably uncomfortable, consideration of emerging technology driven risk.


Thinking like a thief has to be the norm

We also need to keep pace with the evolving techniques and digital armory of the fraudster.

“Thinking like a thief” (or fraudster) is by no way a new idea. I first came across the concept as a fledgling investigator back in early 90’s, under the watchful eye of the incomparable Michael J Comer. And despite its established roots, this mindset has never been more important.

Tackling fraud has always been an unfair and imbalanced fight. In countering fraud, we have to be ‘lucky’ every single time. On the other hand, the fraudster needs to be ‘lucky’ on just that one occasion.

Whereas fraud business leaders will be caught up on wrapping our head around corporate priorities on data, digital and AI opportunities – making the fraud business case for adoption and navigating the treacherous waters of ethics, legality and compliance – our adversaries are likely to be racing ahead unencumbered in the pursuit of fraudulent opportunity, having completed their own test and learn, and being fully prepared for the chance to exploit any vulnerability we offer up.

As fraud leaders, our role must evolve. Not only to manage our as-is resourcing and capability, but also to understand, anticipate and ensure readiness in spotting and mitigating the evolving threats, not to mention the ways in which we will be targeted and our capabilities circumvented.


Cyber and fraud have converged to combat digitally enabled crime

We have to work even harder at enterprise level to break down business silos and meet modern digital threats.

As our businesses move to an increasingly digital first capability, ever greater financial and customer assets are being placed in the online world.  Online self service has evolved from policy purchase and mid-term adjustment to include renewal, electronic claim first notification of loss (eFNOL), end-to-end claims management and payment instruction.  As more value is placed behind this digital wall, with cash out digitised and made ever faster, then targeting by fraudsters is a certainty to follow.

Insurance fraud and cyber risk have now fully converged.  It’s never been more important for fraud leaders to collaborate with wider risk colleagues to understand and mitigate insurance fraud at an enterprise level across the full customer and claim lifecycle.


“I am … inevitable”

With advances in AI – and in the words of arch multiversal comic book villain, Thanos – digitally enabled insurance fraud is ‘inevitable’.

However, as fraud leaders, we can support our business leaders in protecting our businesses and customers by properly understanding the emerging threats, championing capability to keep pace with evolving fraudster techniques and working collaboratively across the enterprise.


Content provided by Matt Gilham, Whitelk Fraud Performance Consulting