Average Cost of Fraudulent Insurance Claims Reaches $84,000

Insurance fraud is costing the industry an average of £84,000 per fraudulent claim, according to new research from global financial technology platform Adyen. The company’s 2025 Insurance Report highlights the growing financial strain on insurers and suggests potential solutions to strengthen fraud prevention measures.

The comprehensive study reveals that one in seven insurance claims (15%) are proven to be fraudulent. Nearly all insurers surveyed (90%) report that fraud, including staged accidents and inflated claims, accounts for an average loss of 2.6% of their annual revenue, with some companies experiencing losses as high as 5%.

Adrian Davis, Commercial Leader for Financial Services and Insurance at Adyen, points to outdated systems as a key vulnerability. “Legacy systems are eroding insurers’ margins. Many still rely on cheques and bank transfers, slowing payouts and frustrating customers who expect instant service,” Davis said. “Meanwhile, AI-driven fraud is exploiting these outdated systems.”

The report identifies several critical weaknesses in current insurance infrastructure. Over half (53%) of insurers acknowledge that their legacy payment systems limit fraud detection capabilities, while 52% continue to rely heavily on manual claims processing. As fraudsters deploy increasingly sophisticated AI-driven attacks, the sector recognizes an urgent need to modernize systems and implement advanced AI solutions to combat emerging fraud threats.

Beyond fraud concerns, the research highlights how payment delays are negatively impacting customer experience and loyalty. A concerning 22% of consumers report having gone into debt while waiting for claims to be processed. This issue disproportionately affects younger policyholders, with 36% of Gen Z and 31% of Millennials borrowing money while waiting for insurance payouts.

These delays are directly contributing to customer attrition, with 58% of insurers admitting that slow claim payouts are a leading cause of customer churn. Both insurers and policyholders agree that the typical one-to-four-week payout period fails to meet modern expectations for speed and convenience.

Looking ahead, nearly two-thirds (58%) of insurers identify meeting customer demand for instant claim payouts as a top challenge for the next five years. The report suggests that reimagining money flows across the entire value chain—reducing friction between purchase, claim, and payout—could position insurers to better manage fraud-related risks.

“Today’s policyholders judge insurers by how quickly money moves, not just whether it moves. This gap is an opportunity for innovation,” Davis noted. The report recommends that insurers modernize their payments infrastructure to enable seamless integration of fraud detection directly within the payout process.

Financial technology could play a pivotal role in this transformation. By adopting real-time, embedded payment solutions, insurers can potentially automate verification processes, expedite legitimate claims, and deliver the seamless experience that customers increasingly expect.

The findings come at a critical juncture for the insurance industry, which faces pressure from multiple directions: rising consumer expectations, increasing sophistication of fraudulent activities, and competition from digital-first insurance providers who prioritize customer experience.

Industry analysts suggest that insurers who invest in modernizing their claims and payment systems now may gain significant competitive advantage in customer retention and operational efficiency. Those failing to address these challenges risk continued revenue erosion from both fraud and customer attrition.

As insurance fraud techniques continue to evolve, particularly with the aid of artificial intelligence, the industry’s response will need to be equally sophisticated, balancing fraud prevention with customer satisfaction in an increasingly digital marketplace.