Workers' compensation fraud costs insurers between $35 billion and $44 billion each year, according to a new report from Conning.
The study, 2025 Workers' Comp Study: Using Data & AI to Fight Workers' Compensation Insurance Fraud, explores how insurers are increasingly turning to artificial intelligence and data analytics to detect and prevent fraudulent claims more effectively.
As fraud schemes grow more sophisticated, insurers are adopting advanced technologies to analyze claims data in real time. Jay Sarzen, a director at Conning, emphasized the importance of these innovations in maintaining market stability.
"Workers' compensation fraud is a significant issue, with estimates suggesting it costs insurers between $35 to $44 billion annually," Sarzen said. "Emerging fraud-fighting techniques centered on data and analytics can enable insurers to identify fraud in real-time, allowing investigators to act more quickly and accurately. This proactive approach is essential for maintaining stability and driving sustainable growth in the workers' compensation market."
The report highlighted AI and machine learning as key tools in fraud detection, allowing insurers to process vast amounts of claims data to identify patterns and anomalies. By leveraging predictive modeling, insurers can detect potential fraud before it occurs rather than relying solely on traditional red flags.
AI-powered systems are also improving claims triage by assigning risk scores to cases, helping insurers allocate investigative resources more effectively. Automating routine tasks and reducing human error, these technologies enable insurers to focus on high-risk claims while streamlining legitimate ones.
According to the study, this dual approach not only strengthens fraud detection but also accelerates claims processing, reducing financial losses and improving customer experience.
The study also examines how data-sharing initiatives and cross-industry collaboration can enhance fraud prevention efforts. Insurers are increasingly working with regulatory bodies and law enforcement to improve fraud detection strategies and share insights across the industry.
Beyond fraud prevention, the report highlights a broader shift in workers' compensation toward predictive, data-driven risk management. As fraud tactics evolve, insurers are adjusting their strategies to stay ahead.
The findings suggest that insurers investing in AI, big data, and analytics will be better positioned to improve fraud prevention, enhance operational efficiency, and drive long-term profitability.
As technology reshapes the industry, companies that embrace data-driven strategies will gain a competitive edge in managing risks and protecting policyholders.
