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Leveraging AI to Prevent Fraudulent Claims and Policy Applications

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Fraud remains a persistent challenge for the insurance industry, costing U.S. insurers over $308 billion annually and eroding customer trust. Fraudsters use increasingly sophisticated tactics—synthetic identities, falsified health records, and staged deaths - making traditional rules-based detection systems less effective and often frustrating genuine policyholders with false positives.

AI is transforming fraud prevention from a reactive process to a proactive, intelligent strategy. By embedding AI across the policy lifecycle - from application to underwriting and claims - insurers can detect fraud earlier, reduce losses, and build greater trust.

1. Pattern Recognition & Anomaly Detection

AI excels at analyzing vast, complex datasets. AI algorithms can spot inconsistencies in applicant history, policy data, and third-party health records. For example, if multiple policies from different cities share the same bank account or emergency contact, AI can flag potential synthetic identity fraud. According to McKinsey, “AI-driven underwriting and claims triage can reduce claims leakage by up to 20%,” highlighting AI’s value in minimizing fraud while improving efficiency.

2. Automated Document Verification

Fraud often begins at the application stage, with fake income certificates or manipulated medical reports. AI-powered tools use OCR and NLP to scan documents for forgery indicators—such as mismatched fonts or altered timestamps—and cross-check health data with third-party records. One leading insurer saw a 40% reduction in application fraud within two quarters of implementing AI-based document scrutiny.

3. Real-Time Behavioral Analysis

AI now analyzes applicant behavior in real time using voice biometrics, sentiment analysis, and linguistic forensics. For instance, AI can detect stress patterns or evasive answers during interviews, flagging potential intent to mislead. These techniques are increasingly used in tele-underwriting and health disclosures, helping underwriters assess not just what is said, but how it’s said.

4. Continuous Claims Monitoring

AI-powered systems provide 24/7 surveillance, cross-referencing death claims with national databases, checking medical claims against diagnostic histories, and identifying suspicious beneficiary patterns. In one case, AI helped uncover a fraud ring submitting multiple high-value death claims from the same IP address, preventing multimillion-dollar losses.

5. Predictive Fraud Risk Modelling

Predictive modelling is among AI’s most powerful tools. By analyzing historical fraud patterns, AI assigns risk scores to applications and claims, flagging those that warrant further review. Studies show that predictive analytics combined with AI can boost fraud detection accuracy by up to 60% while reducing false positives.


6. Image & Video Forensics

Visual fraud is rising in life and health insurance. AI-based image forensics can detect reused or doctored medical images and validate documentation against authentic samples. For example, one insurer used AI to identify the same medical certificate image recycled across multiple claims, exposing a coordinated fraud ring.

The Road Ahead: Human + AI Collaboration

AI is not a silver bullet - fraudsters are evolving too. Human expertise remains essential for interpreting AI outputs, validating edge cases, and ensuring ethical standards. The future lies in a hybrid approach: skilled fraud analysts augmented by AI-driven insights, ensuring speed, scale, and contextual understanding.

As regulatory scrutiny around algorithmic bias and explainability grows, insurers must invest in transparent, ethical AI systems that are auditable and compliant with data protection laws.

Final Thoughts

Insurance fraud prevention is now about intelligent anticipation and seamless detection. By integrating AI into fraud management, insurers can protect their bottom lines, enhance customer trust, and accelerate processes. AI won’t replace fraud analysts—but those who embrace AI will outperform those who don’t.

At Coforge, we combine deep domain expertise with AI, analytics, and automation to deliver purpose-driven fraud detection frameworks. Our solutions help insurers uncover hidden fraud, automate verification, and enhance risk assessment—without compromising customer experience. Partnering with leading insurers globally, we deliver scalable, compliant, and context-aware fraud prevention strategies for measurable impact.

Ashish Kumar Mishra
Ashish Kumar Mishra

Ashish Mishra is the Global Delivery Head for Insurance BU at Coforge.

Seasoned IT leader with three decades of experience spanning MNCs and dynamic start-ups. He has a strong background in Product, Services, and Consulting across Insurance, Banking, Healthcare, and Logistics. He has managed P&Ls and large-scale operations across the Americas, the EU, and APAC. His leadership has been instrumental in institutionalizing global delivery models, building high-performance technology teams, and fostering innovation.

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