Gen AI shows potential to fight insurance fraud

Generative AI was used to fight back cyber attacks against insurersbut it’s also starting to be used to catch and stop insurance fraud, industry professionals and experts say.

Catching fraud requires a workflow that includes machine learning, predictive modeling and rules engines, says Kimberly Harris-Ferrante, distinguished analyst vice president, Gartner. Gen AI is useful because, she says, “you’re going to package multiple technologies to do analytics, workflow, decision tools, risk calculation. And because these technologies are new, they are more simplistic in how they are spun in the industry.”

Insurers are becoming increasingly concerned about applying Gen AI to create fake images or content that can be used in claims, but their use of the technology still needs to catch up, according to Harris-Ferrante.

“Many insurance companies do not have modern fraud solutions. They don’t run these cutting-edge AI-based fraud solutions,” she said. “Mass insurance companies still enforce some rules that a special investigative unit has built, which could work internally. We have yet to see the best in class.”

Instead of using Gen AI to manipulate damage photos for claims, a bigger problem is using it to falsely identify policyholders making claims. Synthetic IDs, which are fabricated identities that are not real people, are used to make claims, as Karen Jennings, director of a special investigations unit at American Family Insurance, explains.

“They misrepresent their information to the insurance company to get a policy, and then depending on the carrier, either the claim is paid or they’re made to understand that it’s not a real person,” she said. “Every case is a different scenario.”

American Family’s own fraud investigators use Gen AI daily to detect fraud, according to Jennings.

Gen AI is also being used to derive an applicant identity through social engineering, according to Jessica Groopman, senior innovation researcher at Intentional Futures.

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“There’s a whole range of different ways we’re starting to see this take shape. Some of them are similar to general cybersecurity threats, where AI is used to manipulate people into giving up sensitive information or taking actions that would commit fraud, instigated by AI,” she said. “There’s even automated social engineering, where AI can be used to harvest public information to generate highly targeted, highly persuasive attacks that are specifically directed at you and your fears, desires, needs right now, context, workspace, boss or whatever. the case may be”.

Small businesses are more susceptible to this risk, both because they have fewer defense resources and less insurance coverage, according to Groopman.

“There are ways AI is being used to combat cybersecurity threats and create new threats,” she said. “This is as true for the use of AI in fraud as it is for a particular cybersecurity use case.”