Algorithmic Integrity and Fraud Risk in InsurTech: A Cross-National Perspective on Trust, Technology, and Regulation

Abstract

Background: The rapid rise of InsurTech—integrating technology into insurance operations—has revolutionized underwriting, claims processing, and customer engagement. However, this transformation has concurrently escalated exposure to sophisticated fraud schemes, algorithmic manipulation, and data integrity issues. While automation enhances efficiency, it also opens new avenues for digital fraud and exploitation, especially in jurisdictions with weaker regulatory oversight. The interplay between innovation and risk management is now at the heart of InsurTech's long-term sustainability.
Objectives: This research aims to (1) assess the emerging patterns and typologies of fraud in InsurTech ecosystems, (2) investigate how different regulatory frameworks influence fraud prevention strategies, and (3) propose a resilience-based framework incorporating AI ethics, blockchain, and predictive analytics for fraud mitigation.
Methods: A mixed-methods approach was employed. First, secondary data was collected from global fraud case databases, RegTech whitepapers, and insurer risk reports (2018–2024). Second, expert interviews were conducted with 15 risk officers and fraud analysts across five countries. Finally, a comparative case study analysis was undertaken between two InsurTech platforms in India and the UK, evaluating their fraud detection protocols, data security measures, and regulatory compliance using a hybrid scoring index.
Findings: The study identifies that algorithmic opacity, third-party API vulnerabilities, and weak KYC/AML integration are key fraud enablers in InsurTech platforms. Insurers using blockchain and AI in tandem reported a 32% improvement in fraud detection accuracy. Regulatory maturity significantly correlated with reduced fraud exposure, highlighting the role of governance in shaping technological resilience. The proposed "Trust-Tech-Fraud" triad framework offers a conceptual model for insurers to simultaneously balance innovation with risk governance.