Lord Hanson, fraud minister, has outlined an ambitious government strategy to tackle fraud across the UK, with a particular emphasis on addressing the rise of tech-enabled crime.
According to GOV.UK, “a key focus of the strategy will be combatting tech-enabled fraud, including emerging tech such as AI.”
Several AI developments are being taken advantage of by cyber fraudsters.
As Delvin Tillett, regional head of cyber at Allianz, explained: “With rapid technological advancement and as AI laws continue to evolve, organisations face increased compliance risks - making cyber underwriting more complex.”
However, while AI is being used for fraudulent purposes, it can also be utilised for good.
The government hopes to harness the power of artificial intelligence “to help tackle crime and reduce the amount of time that the police and prosecutors need to spend completing paperwork rather than delivering justice,” said GOV.UK.
The strategy comes at a critical time for the UK’s cyber insurance market, as AI-driven fraud reaches record highs.
A late 2024 study by Signicat revealed that AI-driven fraud “now constitutes 42.5% of all detected fraud attempts in the financial and payments sector, marking a critical turning point for cybersecurity in the financial industry.”
As AI evolves, its impact extends beyond just fraud. Tillett warns that the growth of AI introduces a range of new threats: “AI introduces expanded risks, such as increased vulnerability to sophisticated cyberattacks, data breaches, algorithmic biases, and IP-related disputes pertaining to ownership of AI-generated content. These risks are requiring the cyber market to adapt and continue to obtain a greater understanding of the implications of increased use of AI within organisations.”
Timothy Zeilman, vice president and global cyber product owner at HSB, highlighted that there is a growing use of AI by threat actors to deceive individuals and evade security systems.
“The most obvious [impact] is probably the use of AI in deceiving employees and other innocent actors to send payments to fraudulent destinations and take other harmful actions. This runs the gamut from the relatively simple use of GenAI tools to craft convincing phishing emails to very sophisticated deep fakes. Threat actors also use AI in a variety of other ways that include the constant variation of malicious code to evade security measures.”
As businesses increasingly adopt AI-powered tools, underwriters are tasked with closing protection gaps while ensuring policies account for these new liabilities.
“The insurance industry is working to keep pace with AI advancements,” said Tillett, “but continuous innovation in AI necessitates ongoing adaptation. While some in the industry are investing heavily in AI-driven solutions, the challenge is balancing innovation with risk — ensuring that AI improves efficiency without exposing the industry to unpredictable liabilities.”
Zeilman added that brokers play a crucial role in helping clients understand how AI is shaping both risk and policy terms: “Brokers can help their clients by carefully following coverage developments – where AI exposures may be the focus of either affirmative coverage grants or exclusions – and communicating that information to their customers,” he said. “They can also encourage their clients to take advantage of the valuable risk management services (some of which incorporate elements of AI) that leading carriers provide with their insurance offerings.”
AI also presents an opportunity to improve how insurance is delivered, but brokers must stay proactive in order to leverage these opportunities effectively.
“Carriers have the opportunity to use AI tools themselves to make their offerings more powerful and their operations more sophisticated,” Zeilman explained. “When carriers implement AI tools on the operational side — to make underwriting and quote generation more accurate and timely or to improve the reliability and efficiency of their claims processes — there is often no affirmative action that insureds or brokers need to take.”
Tillett echoed this view, noting AI’s potential to modernise key insurance functions: “AI can enhance cyber insurance by improving risk assessment through predictive analytics, streamlining claims processing, and offering dynamic coverage adjustments,” he said.
Brokers should also stay ahead of the curve by remaining informed about AI developments in the market.
Zeilman added, “Brokers can stay informed about developments in this area by talking to the carriers, underwriters, and security firms with which they interact and by reading industry publications and attending industry conferences, where these topics are frequently discussed.”
