The rise in artificial intelligence (AI)-driven insurance fraud is putting the insurance sector on high alert, as insurers struggle to keep pace with increasingly sophisticated digital forgery techniques despite deploying their own AI-powered detection tools, industry and government officials said Tuesday.
Data from the Financial Supervisory Service (FSS) showed that liquidated insurance fraud reached an all-time high of 1.16 trillion won ($788 million) last year. Of that, around 201 billion won stemmed from falsified medical certificates and inflated claims for hospital stays and surgeries. Together with staged or exaggerated car accidents, these schemes accounted for 35 percent of the total.
While there are no separate statistics tracking AI-driven forgery and falsification, the industry sees AI as a major factor behind the surge.
In one case, a woman in her 40s filed 39 insurance claims over a three-year period, citing conditions ranging from finger fractures to cancer. Alarmed by the frequency, the insurer cross-checked her submissions against hospital records and found that the document formats, hospital seals and even doctors’ signatures had been fabricated using AI. She obtained 25 million won before being caught.
Last year also marked the first prison sentence for AI-based insurance fraud. A man in his 20s was sentenced to two years in prison for using AI to manipulate diagnoses and extend hospital stays, defrauding insurers of 150 million won across 11 cases.
Officials pointed out that the growing reliance on mobile, photo-based claims has made fraud easier. As images of documents replace physical paperwork, scammers increasingly submit slightly blurred, AI-altered photos that are harder to verify.
“The ease of filing claims by simply taking a photo has unintentionally opened the door to more forgery,” an industry official said. “For smaller claims, insurers may overlook inconsistencies, as detecting sophisticated AI edits in low-resolution images remains technically difficult.”
To counter these risks, insurers have begun using AI to analyze claim histories, medical data and accident patterns for irregularities. Even so, detecting advanced image manipulation remains a significant challenge.
Financial authorities are also recognizing the seriousness of the issue.
“Recent insurance fraud has become so sophisticated through the use of AI that it is difficult to detect not only with the naked eye but also with conventional screening systems,” an FSS official said. “We are jointly developing advanced screening technologies with the insurance industry to identify such cases, but it is expected to take some time.”
Source: Korea Times News
