Fake damage and imaginary watches – how AI images are being used in insurance scams

Rise in AI-Driven Insurance Fraud

Insurance fraud has taken a new turn in 2025, with AI-generated images playing a growing role in deceptive claims. Reports highlight instances of fabricated number plates, invented timepieces, and overstated damage, all of which have been linked to increased fraudulent activity. Cardiff-based insurer Admiral noted a 71% spike in such cases compared to 2024, attributing part of the surge to the use of artificial intelligence tools to alter evidence.

Tools and Tactics Behind the Scams

Artificial intelligence is being weaponized to manipulate visual proof, creating convincing illusions of harm. In one case, a gold and diamond watch clearly crafted by AI was submitted as part of a claim, while another involved exaggerated damage to a vehicle’s rear. Scammers also duplicated claims by modifying number plates and repositioning them, a tactic detected by Admiral’s fraud team. These examples underscore the sophistication of AI in crafting false narratives.

“We see AI that’s been used to manipulate images to look like they’ve been damaged in a certain way, even to create and fabricate documents that were never there in the first place,” said Haith from Admiral’s household claims team.

Industry Response and Detection Efforts

As AI becomes more accessible, insurers are stepping up their defenses. The Insurance Fraud Bureau emphasized the sector’s “heavy concern” over the technology’s role in scams, citing efforts to invest in advanced detection systems. These tools help identify manipulated visuals and fabricated paperwork, with experts noting improved capabilities across the market.

“Although those tools are becoming readily available, we’ve also got some very good anti-fraud software that we use to detect AI and whether something has been altered,” Haith added.

“It is a fast-moving issue, but I think what is positive is the collaboration across the industry, the understanding that it is a threat, but also there are opportunities there in how we can share knowledge and best practice to help use AI in a positive way,” said John Davies of the Insurance Fraud Bureau.

Consequences and Broader Implications

Customers caught in these schemes face severe repercussions, including claim rejections, policy cancellations, and possible legal action. Flora, part of Admiral’s fraud assessment team, warned that the consequences could be “life-changing” in the short term. “In worst cases, it can result in a criminal conviction, but it can make your life pretty difficult,” she explained.

While premiums rise to offset fraud costs, the industry is determined to counteract the trend. By combining technology with shared strategies, insurers aim to balance the risks of AI misuse and its potential benefits for fraud prevention.