From Bots to Blockchain: Navigating the Dual Edge of InsurTech in Combating and Enabling Insurance Frauds

Abstract

Background: The digital transformation of the insurance industry, led by InsurTech innovations, has significantly enhanced accessibility, customer experience, and operational efficiency. However, the integration of AI, IoT, and blockchain has also introduced a new spectrum of fraud risks, from synthetic identities and deepfake documents to automated claim manipulation. As fraudsters exploit technological loopholes, insurers are challenged to stay ahead with equally adaptive fraud prevention tools.
Objectives: This study aims to (1) explore how digital transformation has changed the landscape and typology of insurance fraud, (2) evaluate the effectiveness of AI-driven fraud detection techniques versus traditional methods, and (3) recommend a strategic roadmap integrating ethical AI, real-time analytics, and decentralized identity systems to mitigate tech-enabled frauds.
Methods: This exploratory research utilized a multi-pronged methodology. Quantitative data from 45 InsurTech firms across North America and Asia was analyzed to assess fraud incidence rates pre- and post-digital transition (2015–2024). Additionally, qualitative insights were drawn from interviews with technology officers and fraud managers, along with a review of global case precedents and legal actions involving digital fraud. Comparative analysis was performed using a risk-exposure matrix across startups and legacy insurers.
Findings: The study reveals that AI-enhanced claims processing systems—if not transparently audited—are susceptible to adversarial attacks and false claims approval. InsurTechs deploying decentralized blockchain-based customer verification showed a 40% decline in identity fraud cases. Furthermore, regulatory sandboxes and RegTech collaborations emerged as key catalysts for innovation without compromising fraud control. The research proposes a “Predict–Prevent–Protect” model as a dynamic approach to InsurTech fraud governance.