British insurers sound alarm over unprecedented rise in AI-driven scams
The insurance sector is struggling to combat the growing influx of AI-driven fake claims, as sophisticated fraud is challenging the sector’s outdated traditional system, putting increased pressure on insurers to adapt.
According to a recent report by fintech firm Adyen, one in seven claims (15 per cent) were proven to be fraudulent, resulting in a financial impact on insurers.
Fraudulent claims are eroding insurer revenues, with the average cost of a fake claim reaching £84,000. The report noted that 90 per cent of businesses estimate that fraud accounts for an average reported loss of 2.6 per cent of annual revenue, peaking at 5 per cent.
Not surprisingly, the report noted that outdated systems weaken fraud protection, with over half of insurers admitting that their legacy payment infrastructure limits fraud detection, while 52 per cent rely heavily on manual claims processing.
“Many [insurers] still rely on cheques and bank transfers, slowing payouts and frustrating customers who expect instant service,” explained Adrian Davis, commercial leader for financial services and insurance at Adyen.
As fraudsters deploy increasingly sophisticated AI-driven attacks, the insurance sector recognises the need to modernise systems and embrace next-generation AI to stay ahead of emerging fraud threats.
The world’s leading insurance and reinsurance market, Lloyd’s of London, has delayed the rollout of its strategy to digitalise the market for the fourth time.
Blueprint Two, launched six years ago and labelled an “ambitious strategy”, was pitched as delivering a “profound” change in the market through digitalisation.
However, in September, the programme was delayed again, with the new CEO, Patrick Tiernan, stating it was unlikely to go live before 2028.
Cyber insurance claims surge
This data on fraudulent claims comes after new figures from the Association of British Insurers (ABI) revealed that cyber insurance claims in the UK surged dramatically in 2024.
As businesses deal with increased cyberattacks, fueled by sophisticated AI, insurers paid out £197m, up 230 per cent from the previous year’s £59m.
Jonathan Fong, head of general insurance policy at the ABI, added: “With cyber threats continuing to grow in scale and sophistication, it needs to be a critical component of every organisation’s modern risk management strategy.”