Insurance Fraud Impacts Us All: Why a Counter-Fraud Strategy Is Essential for Every Business

Insurance fraud is not a distant threat – it’s a real crime with real consequences, impacting every stakeholder in the industry. From opportunistic consumers, through to staged accidents and sophisticated cyber schemes, fraud drives up costs, disrupts operations, and can severely damage a company’s reputation. In today’s environment, having a robust anti-fraud strategy isn’t optional; it’s a fundamental cost of doing business. Companies that neglect this reality risk not only financial loss, but also the erosion of brand trust – a risk no organization can afford.

At Sedgwick, we recognize that fraud is an “all of us” problem. It’s not just about protecting our own interests, it’s about safeguarding our clients, policyholders, and the integrity of the insurance ecosystem. As fraudsters become more creative and technology-driven, our response must be equally sophisticated and collaborative.

Why Sedgwick Participates in the Global Insurance Fraud Summit

This year, Sedgwick was honored to attend the seventh annual Global Insurance Fraud Summit (GIFS) in Toronto – a unique event focused on collaboration among global anti-fraud leaders. The GIFS brings together regulators, law enforcement, and industry experts to share insights, foster partnerships, and drive real change in the fight against insurance fraud.

For Sedgwick, participating in the GIFS is about partnering with global peers, staying ahead of emerging threats, and strengthening our commitment to protecting clients and the integrity of the insurance industry.

Top Trends We Should All Know About

1. Synthetic Identities and Cross-Border Fraud

Synthetic identity fraud is rapidly growing, with criminals blending real and fake information to create new personas. For example, a fraudster might use a genuine Social Security number from one individual, combine it with a fictitious name and address, and then open a bank account or purchase an insurance policy. These accounts often remain dormant for months (even years), building credibility before being used to commit fraud.

At the summit, experts shared cases where synthetic identities were used to commit insurance fraud. A particularly noteworthy example involved cross-border schemes, where fraudsters operating from overseas were able to open insurance policies in other countries, exploiting gaps in verification processes. 

The summit also noted the use of synthetic identities being used to commit other financial crime – examples included securing employment during the pandemic via remote interviews conducted using deepfake technology; a criminal using publicly available images to impersonate a real person, gain access to company records, and then orchestrate a major theft from within; and the infamous “Shanto Tequila” heist, where an Armenian gang used synthetic identities and fake logistics companies to steal 24,000 bottles of tequila, moving goods across borders with no physical presence. 

Synthetic identities are difficult to detect and can be used to target businesses as well as individuals, making them a top concern for insurers worldwide.

2. Businesses as Targets

Fraud isn’t just a consumer issue. Increasingly, businesses themselves are being targeted, as with the Shanto Tequila heist, where the criminals exploited logistics vulnerabilities, double-brokering trucking contracts and moving stolen goods across borders. 

Another example given was the “Tow Truck Wars” in Canada, where kickback schemes between tow truck drivers and auto body shops led to inflated repair bills submitted to insurers – the insurance industry estimates that fake repair bills total up to $2 billion a year in Canada. In some cases, legal professionals challenging these schemes faced threats and had to go into hiding, highlighting the real-world dangers of organized fraud targeting businesses.

3. Organized Crime and Technology

Organized crime networks are leveraging technology to scale their operations. Auto theft, for example, is now often driven by digital tools and connectivity – modern vehicles are “computers on wheels,” and criminals are motivated by hacking and data theft. The summit revealed that stolen vehicles are often used as currency in global crime, funding drugs, weapons, and even terrorism – Ford F-150 trucks have been traced from North America to Russia, UAE, and Nigeria, sometimes linked to drone warfare.

Another example is the use of vehicles as part of money laundering schemes, where cars are shipped overseas and sold to fund criminal activities. 

In healthcare, organized fraud rings have set up fake clinics to bill insurers for services never rendered, sometimes colluding with real providers to split the proceeds.

4. The AI Revolution

Artificial intelligence is both a risk and a tool in the fight against fraud. Fraudsters use AI to create deepfake audio, images, and documents, making schemes faster and more scalable. At the summit, a fake audio of a public figure was generated in minutes, demonstrating the ease with which misinformation can be spread. In another case, a seven-year-old was able to use AI to create a convincing image of herself with a celebrity, showing how accessible these tools have become.

On the flip side, analytic AI is proving invaluable for detection – models that assist investigators in surfacing patterns and anomalies are outperforming those that simply flag suspicious activity. Sedgwick, for one, is actively incorporating AI tools into our operations, automating routine detection and supporting investigators with actionable insights. For example, AI can scan thousands of documents for anomalies, flagging potential fraud for human review.

5. Social Impact and Changing Demographics

Fraud’s impact goes beyond premiums. High-profile schemes like the tequila heist and tow truck wars hit consumers directly at the point of sale, not just through insurance costs. The summit also addressed the challenge of reaching younger generations, who may not perceive fraud as a crime and are inundated with manufactured content on platforms like TikTok. In Sweden, a TikTok campaign created in partnership with influencers led to a significant spike in fraud reporting among younger audiences, demonstrating the power of meeting people where they are.

Another example is the use of social media to recruit participants for staged accidents or fraudulent claims, with videos and posts glamorizing these activities and downplaying the risks. Changing the narrative and educating the public – especially younger consumers – is essential for long-term fraud prevention.

Our Path Forward

The fight against insurance fraud demands vigilance, innovation, and partnership. At Sedgwick, our path forward is clear:

• Invest in Technology: We’re committed to deploying advanced AI and predictive analytics to detect and prevent fraud, amplifying the expertise of our adjusters and investigators.
• Foster Collaboration: Building partnerships across borders and sectors is essential. We support industry-wide data sharing and joint initiatives to tackle cross-border and organized crime.
• Educate and Advocate: Changing the narrative around fraud – positioning insurers as “financial first responders” – is key to building public trust and engaging new generations.
• Balance Simplicity and Security: As consumers demand seamless experiences, we must balance straight-through processing with robust fraud controls.
• Continuous Improvement: We’ll keep learning from and sharing with global leaders, adapting our strategies, and sharing insights to stay ahead of emerging threats.

Fraud is a real crime with real consequences. At Sedgwick, we’re proud to stand with our partners in the global fight, protecting our clients, our communities, and the integrity of the insurance industry.