Fraud-as-a-Service Exposed: New Threat Facing Insurers

We’ve entered the era of subscription-based fraud, where criminals don’t need skills, just a login. Sophisticated crime tools that once required expertise are now just a click away, turning insurance fraud into a service anyone can access. Fraud-as-a-Service (FaaS) is dangerous and disruptive: fake documents, AI-generated identities, and deepfakes are now available to anyone with an internet connection. For insurers, this is a seismic shift. The barrier to entry for insurance fraud has never been lower, and the consequences are already reshaping claims investigations. 

What is Fraud-as-a-Service?

Fraud-as-a-Service (FaaS) mirrors the Software-as-a-Service (SaaS) model that businesses have embraced for decades, but with criminal intent. With FaaS, fraudsters can “subscribe” to AI-powered platforms to impersonate executives or submit fraudulent claims without needing any technical expertise. Like SaaS software, these platforms provide ready-made tools, templates, and updates, allowing criminals to plug in, execute scams, and continually refine their operations. In other words, just as a company pays for access to Microsoft 365 instead of building its own software, fraudsters pay for deepfake services instead of creating AI technology themselves. 

Instead of productivity apps, FaaS give fraudsters ready-made tools, including:  

• Synthetic identity generators combining real and fake data.
• Deepfake tools to create convincing video or audio
• Forged document templates for everything from driver’s licenses to medical records.
• Fake credentials to bypass intake systems.

According to Ethos’s 2025 State of Insurance Report, the use of AI-generated identity variants submitted to carriers rose 33% year-over-year, much of it tied to FaaS platforms. This means insurers aren’t just dealing with lone bad actors, they’re fighting industrialized fraud. 

What Makes FaaS So Disruptive?

Fraud-as-a-Service is reshaping the insurance landscape because it makes fraud easier, faster, and more organized than ever before: 

• Lower barrier to entry: In the past, staging fraud required connections, experience, or specialized knowledge. Now, $20 spent on a dark web marketplace can buy templates or bots that handle most of the work.
• Scalability: Fraudsters can launch hundreds of claims at once, testing insurers’ defenses until they find weaknesses.
• Professionalization: Some FaaS operators offer tutorials, updates, and even “customer service,” turning fraud into a structured operation.

For insurers, this means that fraudulent schemes are no longer isolated incidents. They’re industrialized, sophisticated, and continuously evolving.

The Arms Race: Insurers vs. Fraudsters

Fraudsters are innovating fast, but insurers are keeping up. In 2025, leading carriers are using AI-powered real-time fraud scoring at the First Notice of Loss, allowing earlier referrals to Special Investigations Units while reducing false positives. Early results from carriers using these systems include: 

• 83% more claims processed.
• 20% higher fraud capture rates.

The U.S. Treasury reported recovering over $4 billion in 2024 through enhanced AI-driven processes. Investigators are also leveraging open-source intelligence tools, like social media monitoring, geolocation tracking, and facial recognition, to cut investigation times from hours to minutes. 

Still, technology alone isn’t enough. FaaS evolves rapidly, and fraud rings constantly test insurers’ systems. That’s why human oversight and investigative expertise remain critical to staying ahead of fraudsters. 

With Fraud-as-a-Service, fraudsters no longer need deep expertise or elaborate networks. They can simply buy prepackaged crime. For insurers, the stakes are high: more attempts, more sophisticated schemes, and a flood of new fraudsters entering the space. 

The good news is insurers aren’t powerless. By combining cutting-edge fraud detection, investigative expertise, and consumer education, they can outpace even the most professionalized fraud campaigns. FaaS has lowered the bar for fraudsters—the real question is how quickly insurers can raise theirs. 

Check out our sources:

Ethos Risk. 2025 State of Insurance Report. Ethos Risk, 2025.

U.S. Department of the Treasury. Treasury Announces Enhanced Fraud Detection Processes, Including Machine Learning AI, Prevented and Recovered Over $4 Billion in Fiscal Year 2024. U.S. Department of the Treasury, 17 Oct. 2024.