With more insurance business being conducted using online platforms, and with the increasing use of artificial intelligence ("AI") in everyday life and work, an unfortunate consequence of these technological developments that we are seeing at DAC Beachcroft is an increase in what we call 'digital claims fraud' in the property context, whereby policyholders are using AI to facilitate the pursuit of fraudulent property insurance claims. In particular, three key areas where we are seeing this problem manifest itself are as follows:
- Online claims underwriting – with more consumer and even commercial insurance policies being incepted online using digital platforms, there is an increased risk of material misrepresentations of the degree of risk associated with providing insurance cover, particularly without the input of human underwriters prior to incepting insurance policies.
- The use of AI to create false documents and alter existing documents. We have seen a significant increase in more sophisticated false documents being used to pursue insurance claims. This includes but is not limited to invoices, estimates and even emails to create false correspondence chains.
- Using AI systems to generate written responses to insurers' investigation and validation of suspicious insurance claims. We have seen an increase in correspondence that appears to be AI-generated, due to the generic language used and the reliance on conflicting legal terminology and principles. In particular, we have seen correspondence with reliance upon purported case law, where the case in question either does not exist at all, or where either the facts of the case or the legal principles derived from the case differ in significant respects from how it is described in the correspondence.
As reliance on online platforms and AI systems is only bound to increase in the future, insurers therefore need to ensure that their systems are capable of identifying and robustly dealing with digital claims fraud. Below are some key tips on how insurers can protect themselves and what we can do to help:
- With online claims underwriting and the impact of the Consumer Insurance (Disclosure and Representations) Act 2012, it is essential that insurers ask very clear and specific questions in their online proposal forms to remove the potential for any ambiguity in the questions asked about the key risks that insurers want further information on. Furthermore, the proposal forms should include detailed guidance on (i) the purpose and importance of the questions asked; and (ii) the consequences of providing incorrect answers to the questions asked, so that potential policyholders are aware of the consequences of providing false information.
- Ensuring that insurance claims handlers and investigators are trained on how to identify and analyse/investigate suspicious documents submitted to them, with adequate systems in place to assist with this process. At DAC Beachcroft, we have a bespoke Intel team and sophisticated systems in place for analysing and validating suspicious documents that have been submitted in support of insurance claims. This enables our clients to identify whether the documents are entirely false or have been altered in some way, thereby assisting them in the validation of the claims in question.
- Written correspondence from policyholders in response to claims investigation and validation needs to be carefully reviewed prior to making any responses to the same, particularly in respect of the legal principles and case law referred to therein. DAC Beachcroft's Property Fraud team is a bespoke, market-leading team with members who are trained and experienced in this unique area, enabling us to assist you robustly in responding to such correspondence and identifying where incorrect legal principles and case law have been relied upon.
Adopting robust systems and procedures for identifying, investigating and responding to digital claims fraud will enable insurers to adequately address this growing problem, ensuring that fraudulent policies and claims are identified and robustly dealt with at the earliest opportunity. If you would like to discuss any aspect of this article, please feel free to contact us.
