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The post-pandemic economic environment and digital advancements have reshaped the fraud landscape, making it more sophisticated and widespread. Our experts dive into these changes, offering a global perspective.
Key Takeaways
- Growing Threat: Insurance fraud costs billions annually, driven by post-pandemic pressures and sophisticated techniques like AI-generated scams.
- Global Impact: Fraud varies by region, influenced by local economic, cultural, and regulatory factors, impacting sectors like auto and health insurance.
- Rising Tactics: Common fraud tactics include staged accidents, forged documents, and impersonation, necessitating advanced detection methods.
- Detection Tools: Modern tech like AI, predictive modeling, and OSINT aids insurers in spotting red flags and combating complex fraud schemes.
- Pinkerton Expertise: Pinkerton provides specialized global support with local expertise, helping insurers address fraud with innovative tools and investigations.
Insurance fraud is a pervasive issue that costs billions annually and affects everyone from insurers to everyday policyholders. Worldwide losses exceed $80 billion each year, with significant impacts in sectors like auto and health insurance. Pinkerton's fraud experts share their frontline insights on emerging insurance fraud trends, regional challenges, and effective strategies to combat fraud.
Emerging Trends and the Rising Cost of Insurance Fraud
In the last one to two years, insurance fraud has evolved rapidly, driven by a perfect storm of technological advancements, lingering post-pandemic economic pressures, and increasingly sophisticated criminal tactics.
Digital vulnerabilities have compounded this issue, with the rise of mobile apps, online claims portals, and peer-to-peer payment systems creating new entry points for account takeovers and cyber-enabled fraud rings.
Post-pandemic, economic factors have played a huge role too: financial hardships from inflation, job losses, and supply chain disruptions have motivated more individuals and organized groups to inflate claims or stage incidents, leading to an uptick in auto insurance fraud schemes (like staged accidents) and similar spikes in property and health scams.
In the U.S., the insurance industry consists of more than 7,000 companies that collect over $1 trillion in premium payments annually. According to the FBI, the total cost of insurance fraud amounts to more than $40 billion annually. This equates to large losses for insurance companies and leads to increased premium costs to individuals, said Sergio Dominguez, Pinkerton’s Mexico Country Director, who has more than 25 years of experience in corporate and fraud investigations across multiple sectors, including banking, FMCG, pharma, construction, and retail.
On a broader scale, the global cost of these schemes is ballooning, with insurers facing advanced modalities such as AI-generated fake documents and coordinated multi-claim insurance attacks that traditional detection methods struggle to catch. While these trends span regions, they're amplified by local factors—think regulatory gaps in emerging markets or tech adoption in developed ones—highlighting the need for proactive, tech-savvy insurance fraud prevention strategies.
Adam Chambers, Pinkerton Managing Director in the APAC region, says, “The global cost is escalating, with estimates of hundreds of billions annually and fraudulent claims increasing 10-20% year-over-year in some regions,” he said.
Insurance fraud, he adds, is widespread due to economic pressures, low consumer awareness, cultural tolerances for misrepresentation, and digital vulnerabilities. In Indonesia, for example, 77% see claim falsification as highly unethical, yet scams persist amid post-pandemic recovery. India's low insurance penetration (2.76% of GDP) and rapid market growth amplify issues, with global insurance fraud losses hitting ~$75 billion annually.
Timothy Barrett, Pinkerton Director in Australia who oversees the Insurance Investigation Team, agrees, "Insurance fraud seems to have a different nuance depending on the market and the impact of COVID-19. Currently, in India, we are seeing a significant increase in staged accidents, whereas in Indonesia, there is a known issue with health insurance and its scope. In Australia, it is suspected that organized gangs are working to target health and life insurance in a range of ways. We have seen a large rise in insurance claims, which has been driven by economic conditions post-COVID-19.”
Similarly, economic conditions — notably inflation and instability — have given rise to opportunistic fraud. Dominguez adds, "Fraudsters in Mexico mostly use voice cloning to falsify claims and impersonate policyholders. Increased reliance on digital onboarding and claims processing has exposed insurers to cyber-enabled fraud, especially in the health and auto sectors."
AI has been a double-edged sword, notes Rory Lamrock, Pinkerton Director in Western Europe, whose background includes global security, intelligence, and investigations into cases of fraud and extortion. New technology has created opportunities for insurance fraud detection, document analysis, and the processing of large volumes of data. It has also equipped bad actors with the tools to perpetrate ever more sophisticated fraud, from staged car crashes to faked deaths, falsified medical records, and ghost broking.
He highlights, "There has been a rise in identity theft, often supported by the use of generative AI, phishing attacks, and online scams, which is a key driver in the increase in policy fraud across all types of insurance. In the UK, we have mostly been helping clients verify life and health insurance claims, often related to falsified documents or misrepresentation."
Regional Challenges in Global Insurance Fraud
Fraud manifests uniquely across different regions, yet a clear trend emerges: it's becoming more intelligent, rapid, and increasingly global.
Lamrock adds, "Claimants who use information or documents from foreign jurisdictions to support their claim must be investigated due to difficulties in verifying the facts at the source in those countries. Hospital records in certain African countries can only be verified in person due to a lack of digitized, centralized records, for example. The time and expense involved in corroborating facts related to a claim in a difficult-to-access country create opportunities for fraudsters to exploit the claims process.”
The most prevalent forms of insurance frauds, such as staged deaths or illnesses, inflated claims, falsified documents, and health-related scams entangled with life policies, reveal widespread tactics. However, the expression of fraud is influenced by cultural, economic, and regulatory nuances specific to each region.
Barrett says, "One of the major insurance issues is the ever-changing environmental conditions and large-scale weather events, leading to insurers across the globe to reconsider reinsuring in certain markets. The risks associated with these events, along with the challenges in assessing potential fraud, often make insuring in these markets less viable."
In some regions of Australia, particularly those prone to cyclones and flooding, insurance companies have faced severe challenges. The increasing frequency and intensity of these natural disasters have led to skyrocketing claims, forcing insurers to either substantially increase premiums or withdraw from covering these areas altogether. For example, in Northern Queensland, where insurers have withdrawn, the decision not to provide coverage can lead to unintended consequences, and the opportunity for fraud can increase. Individuals might resort to dishonest tactics, such as claiming damages from events that didn't occur or exaggerating legitimate claims, to secure payouts under less risky policies they might hold elsewhere or through smaller, less discerning firms.
Additionally, the stress of being uninsured can drive some people to participate in orchestrated fraud schemes — like staging damage or exploiting gaps in policy details — to mitigate their financial losses. Thus, while the environmental risks directly affect insurability, they indirectly contribute to increased fraud activities as people struggle to cope with the lack of affordable, reliable insurance options.
“In Mexico,” Dominguez explains, "informal economies and mistrust in institutions can lead to higher tolerance for fraud. Weak law enforcement and inconsistent judicial rulings increase legal risk. Those involved in these schemes face minimal consequences, reinforcing a culture of impunity. High inflation and unemployment are driving individuals toward claim exaggeration or staged events."
According to the Mexican Association of Insurance Institutions (AMIS), at least 30 percent of insurance fraud attempts in Mexico are related to staged car accidents (also called “montachoques” in Spanish). Some of the most common tactics include sudden braking, aggressive lane changes, and collusion with motorcyclists or pedestrians who cause minor accidents and then demand cash payments.
“Reports of this crime have increased by 15 percent, particularly on high-traffic avenues. Areas such as Mexico City, the State of Mexico, Jalisco, and Nuevo León show a higher incidence,” says Dominguez.
Red Flags and Detection Tools, and Pinkerton's Unique Support
Insurance fraud continues to challenge the industry with a mix of enduring red flags and emerging threats. Insurers need to remain vigilant for signs. As Dominguez points out, "Red flags are mostly the same as in the past: claims filed shortly after policy inception; inconsistent documentation or exaggerated injuries; multiple claims from the same address or individual."
To combat these challenges, modern detection tools have risen to prominence. Technologies like AI-powered predictive modeling and anomaly detection, alongside OSINT (Open-Source Intelligence) tools — which now include social media reviews and behavioral analytics — enable early spotting of fraudulent activities.
"OSINT is a great starting point on any claim as it gives a snapshot of the potential subject and how they are currently presenting and how that ties in with what they are claiming," said Barrett. "We had a case where a claimant was allegedly incapacitated with a double-fused neck. When we started with an OSINT insurance investigation, we had found he had made a full recovery and was engaged in rodeo riding."
For claims like these, Pinkerton's specialized handling can make a significant difference. "For example, if a claim is managed by Pinkerton Australia's experts and one of our partners in this domain, it may result in a low payout or even dismissal,” states Chambers. “Conversely, if another agency with a lax approach handles it, the cost can rise, impacting the insurer significantly and potentially elevating the client's premiums. Ensuring claims are correctly handled is a critical component of Pinkerton’s service offerings. Not every claim we scrutinize is fraudulent, but mishandling can lead to approvals without due diligence."
Looking ahead, Pinkerton’s experts warn that insurance fraud will only grow more complex, driven by advancements in AI and digital claim processes. They have also observed a growing demand for local expertise in fraud investigations.
“We have seen a rise in the demand by local insurers to get in-country experts for fraud investigations, surveillance, and compliance. Additionally, these companies are more interested now in deep due diligence (with OSINT capabilities included in the reviews) on claimants, vendors, and syndicates,” says Dominguez.
Call to Action
As fraud continues to evolve, so too must the industry's approach to prevention. To combat insurance fraud, insurers should prioritize training for spotting behavioral red flags and documentation inconsistencies. Investment in technology like real-time analytics and predictive modeling is crucial.
Insurers are encouraged to connect with third-party investigators, like Pinkerton, to protect their business, clients, and reputation through comprehensive intelligence, embedded expertise, and cutting-edge tools.
“Pinkerton will continue helping insurers with boots on the ground investigations to clarify incident details, complement the insurers’ due diligence process, and support their analytics to mitigate risks of fake documentation and fraudulent claims,” says Dominguez.
Partnering with a firm like Pinkerton means sharing global trends, preparing clients for emerging threats. “We combine new technology with traditional techniques, and we do it globally in a scalable way with a full suite of investigative services," says Lamrock.
Contact us today to discuss how Pinkerton can help your organization tackle the rising costs of fraud.
Frequently Asked Questions (FAQ's)
1. What are AI-driven insurance fraud detection techniques?
AI techniques include predictive modeling, anomaly detection, and AI-generated document analysis to identify fraudulent claims early on.
2. How has the post-pandemic rise in digital insurance fraud affected the industry?
Economic pressures and digital vulnerabilities post-pandemic have increased fraudulent claims through apps, portals, and cyber-attacks.
3. What are regional challenges in global insurance fraud?
Regional challenges stem from cultural, economic, and regulatory nuances influencing prevalent fraud types like staged accidents or scams.
4. How does inflation drive staged insurance claims?
Inflation-related hardships lead to exaggerated claims and staged accidents as individuals seek financial relief.
5. How is voice cloning and identity theft used in insurance scams?
Fraudsters use voice cloning and identity theft to impersonate policyholders and submit false claims, exploiting digital onboarding processes.
