In 2025, the insurance industry is contending with a rapidly evolving and increasingly sophisticated fraud landscape that threatens both insurers and policyholders across the UK and beyond. Traditional insurance fraud tactics, such as fake claims and staged accidents, remain prevalent, but new technologies and sophisticated criminal strategies have escalated the challenge to unprecedented levels.
A primary concern is the sharp rise in identity theft, which has become the fastest-growing facilitator of insurance fraud. The Insurance Fraud Bureau (IFB) reports a record surge in identity theft cases where criminals exploit stolen personal data to open fake insurance policies, file false claims, and launder money through legitimate channels. This rise is fuelled by widespread data breaches and an active dark web market for personal information. Supporting this, the National Insurance Crime Bureau (NICB) in the United States projects a 49% increase in insurance fraud linked to identity theft by the end of 2025. Their analysis revealed that synthetic identities, fabricated from a mixture of real and fake personal data, account for nearly a quarter of the fraudulent claims, leading to losses exceeding $47 billion in 2024 alone. NICB has introduced machine learning tools to detect such spurious identities by flagging anomalies like multiple dates of birth associated with a single social security number, aiding investigators in intercepting fraudulent claims early.
Artificial intelligence (AI) serves as a double-edged sword in this arena. While insurers increasingly implement AI-driven tools to strengthen fraud detection, fraudsters are employing AI technologies to devise more convincing scams. Deepfakes, synthetic identities, and AI-generated documents are becoming common tactics to deceive insurers. Experian’s research highlights that despite widespread business adoption of AI to fight fraud, consumer trust in these automated systems is low, with less than one in four consumers interacting with AI-driven services and only 18% fully trusting them. This mistrust underscores a significant challenge in leveraging AI effectively against fraud. Moreover, Experian's forecast includes emerging threats linked to AI and generative technologies, such as "Gen4 bots" which mimic human behaviour to bypass security measures, and social engineering scams that exploit viral social media trends to manipulate victims.
Organised crime remains a formidable front, with criminal rings orchestrating complex schemes ranging from staged “crash-for-cash” accidents to ghost broking, selling fake insurance policies, and high-value asset fraud, particularly involving classic vehicles. These groups often operate transnationally, complicating efforts by law enforcement to investigate and prosecute offenders. Additionally, fraud is expanding into sectors related to insurance, such as telecommunications and e-commerce, where scammers build synthetic identities or test stolen credentials before targeting insurance firms.
Behavioural manipulation through social engineering techniques has also intensified. Fraudsters use phishing, vishing (voice phishing), and impersonation tactics to trick individuals into revealing sensitive information or authorising fraudulent claims. This psychological aspect of fraud requires consumers to be vigilant, cautious about unsolicited contacts, and to verify identities rigorously. Experts advise never sharing personal data with unknown callers and recommend checking website security indicators closely before inputting sensitive information. Two-factor authentication is also encouraged as a robust defence mechanism.
In response, the insurance sector is embracing a multi-faceted defence strategy. Collaborative intelligence sharing among insurers, regulatory bodies, law enforcement, technology firms, and professional groups is central to enhancing fraud detection and prevention. Advanced analytics and machine learning models are being deployed to identify anomalous behaviours suggestive of fraud swiftly. Public awareness campaigns aim to educate consumers about common fraud red flags and encourage vigilance. Enhanced Know Your Customer (KYC) and Know Your Expert (KYE) protocols, combined with real-time identity verification, are becoming standard to prevent fraudulent activity at the outset.
Legislative measures such as the Economic Crime & Corporate Transparency Act 2023 (ECCTA) have introduced new corporate criminal offences, including the failure to prevent fraud. This places additional responsibility on insurers to strengthen their anti-fraud controls and processes, signalling a zero-tolerance approach to fraud risk management.
Ultimately, 2025 has transformed insurance fraud into a high-tech cat-and-mouse game. As fraudsters leverage AI and synthetic identities to operate at scale, insurers must invest in smarter systems and foster cross-sector collaboration. Consumers, for their part, must remain alert and informed, recognising that in the fight against fraud, awareness is the first line of defence.
📌 Reference Map:
- [1] (ABI Insurance Blog) - Paragraphs 1, 2, 5, 6, 7, 8, 9, 10
- [2] (NICB) - Paragraphs 2, 3
- [3] (Experian Survey) - Paragraph 4
- [4] (Experian Fraud Forecast) - Paragraph 4
- [5] (NICB Identity Theft Prevention) - Paragraph 6
- [6] (Experian GenAI Report) - Paragraph 4
Source: Noah Wire Services