AI deepfakes emerge as new threat in insurance fraud, warns Kennedys report

Geopolitical risks due to deglobalisation, driven by a fragile geopolitical landscape also pose as a threat for the industry.

One of the new rising risks insurers face are artificial intelligence (AI)-generated deepfake images submitted as evidence in a fraudulent claim, according to the Global Forecast 2024, by law firm Kennedys.

The report also highlighted geopolitical risks due to deglobalisation, driven by a fragile geopolitical landscape. Environmental, social, and governance (ESG) factors, such as biodiversity loss, are recognised as growing concerns for insurers. 

Kennedys’ report said the performance of AI in a manner that is not expected may lead to examples of claims for:

• Property Damage: A warehouse cleaning robot causes a fire or flood by inserting a wet cloth into a live plug socket.
• Personal Injury / Bodily Harm: A self-driving car fails to account for jaywalking, leading to a pedestrian fatality.
• Reputational Damage: A smart conversational bot, intended to promote a company brand, malfunctions and creates negative online attention.
• Medical Malpractice: Malfunctioning AI system results in misdiagnosis during medical screening.
• Cybersecurity: An AI chatbot deployed by a bank is hacked, leading to an unauthorized transaction.
• Fraud: AI-generated deepfake digital content is used to support a fraudulent claim.
• Discrimination in Hiring: Unintentional bias in AI algorithms leads to discriminatory applicant selection.
• Securities Transactions: Businesses may face investigations and fines for using AI tools that manipulate the securities market impermissibly.

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“For example, while cyber insurance typically covers data leakage, it will not typically cover bodily harm, brand damage or damage to physical property, which could occur from the same event.” the report said.

For Asia Pacific, cyber attacks or related issues, inflation, and automation were identified as future potential threats of claims.

Evident risks arising

The insurance industry stands at a critical juncture, with the opportunity to reshape claims handling and underwriting processes. Geopolitical instability, evident in acts of war and trade tensions, prompts businesses to reassess practices, potentially leading to deglobalisation. 

Climate change remains a prominent risk, affecting claims with increasing frequency. The ESG framework shifts, holding corporations to higher standards, creating both growth opportunities and compliance challenges.

'Greenhushing' claims surface, questioning the alignment of ESG stances with shareholder value. The regulatory environment grapples with societal, technological, and geographical changes, creating gaps and legal challenges. 

Commercial agility and strategic planning become crucial for navigating the evolving business landscape. The insurance sector must adapt swiftly to emerging risks within ESG, geopolitics, and technology, as regulators strive to balance governance with innovation.

The report draws on insights from Kennedys lawyers worldwide to analyze evolving risks in the insurance market.