Gen Z consumers are more likely to use AI to alter an insurance claim to make their claim more financially favorable, recent data suggests. But consumer advocates and members of the generation themselves say this is a mark of a bigger, more insidious issue within the fabric of the U.S. insurance market.
A third of all consumers would consider using AI to digitally alter an insurance claim image or document in their favor, according to a March report from insurance data analytics company Verisk. That number rises to 55 percent for Gen Z.
"These statistics are an example of widespread frustration with the insurance system," said Michael DeLong, research and advocacy associate for the Consumer Federation of America (CFA) Campaign for Fair Auto Insurance.
CFA, an association of over 200 state and local consumer groups working to help consumers through research, advocacy and education, co-founded the Coalition Against Insurance Fraud to protect consumers. Fraud costs consumers at least $308.6 billion annually, according to the coalition.
"I think a lot of this frustration stems from people's perceptions that insurance companies aren't being held accountable," said DeLong. The California Department of Insurance, for example, announced on May 4 enforcement against State Farm, the largest property and casualty (P&C) insurance company in the U.S. with a $170 billion net worth, for mishandling insurance claims from the 2025 Los Angeles wildfires. Violations include slow and inadequate investigation, underpayment, unfair denials and inadequate communication.
Penalties could reach up to $10,000 for willful violations, according to the department, with at least 398 violations under review. Even a nearly $4 million penalty, DeLong said, isn't enough. State Farm "probably thinks that's just the cost of doing business, and will keep on doing this in the future," he said.
When it comes to Gen Z consumers who'd consider using AI to game the system, Megan Snyder, a 28-year-old entrepreneur in Marietta, Penn., said that while she wouldn't do it, she doesn't fault those who do. "It feels like the system wants us to lose," she said.
Snyder struggled to pay her $500 auto insurance deductible when she needed a windshield replacement, especially with her existing vehicle debt. "The idea of financial stability was very different for older generations," she said.
Jason Rogers, a 28-year-old content specialist in West Palm Beach, Fla., isn't shocked by the data, but is concerned. "I will not say that the economic pressure Gen Z faces is irrelevant," he said. "I think the issue of rising housing costs and stagnant wages is an important factor in how people perceive fairness, but there is something else that gets overlooked."
Rogers pointed out that more fraud increases insurance rates, which ultimately hurts consumers. "The solution to a broken system is not giving this system an excuse to further crack down on young policyholders."
Shane Riedman, president of anti-fraud solutions at Verisk, pointed out that P&C insurance companies' anti-fraud functions are generally a product of regulation intended to protect consumers from rising rates.
For example, 23 states require a P&C company to have an active anti-fraud plan. "It's not to protect the bottom line of the insurance company," said Riedman. Rather, it's to protect the solvency of the P&C insurance market. "I don't think we've done a very good job of teaching the younger generations about the necessity of that risk sharing concept," he said.
While younger people are generally more likely to commit crime, regardless of the generation they belong to, Riedman said the leap to 55 percent for Gen Z is shocking. Transparency and education, he said, would go a long way in helping the system garner more trust.
"I don't think that we do a very good job educating really anybody about how insurance companies make money," he said, adding that most P&C insurance companies don't make money on premiums but by investing. And while he argued profit margins are generally low for the industry, P&C did see a cyclical peak of 15 percent return on equity in 2025.
DeLong is also keen on transparency and education, but from a different lens. Insurance companies "don't want to provide information about how they determine their rates, about their claims process and how they determine what payouts consumers get," he said. "They use a whole bunch of factors to unfairly charge consumers higher premiums."
In most states, for example, insurance companies can use credit scores to inform rates. "Regulators should ban these harmful factors that aren't related to risk, because they just result in higher premiums and unfair discrimination," said DeLong.
Moreover, DeLong advocates for stronger consumer protections, like expanding prior approval systems—in which insurance regulators have to approve a rate increase before it goes into effect—to all states. Fifteen U.S. states currently have a prior approval system for homeowners insurance, and about half of U.S. states have these regulations for auto insurance. Many other states have weaker forms of insurance regulation, like review after a rate hike is already in effect.
While insurance companies have been using AI and other emerging technologies to combat fraud for years, Riedman said they're in an arms race. "We're constantly having to retune and redevelop the models" due to constant improvement of AI outputs, he said. Even so, humans always review suspected fraud after an automated system flags it.
For Gen Z, the consideration to use AI to adjust insurance claims in one's favor exists in tandem with an insurance market—and a broader economy—that frustrates consumers. Net written premiums for private U.S. P&C insurance companies grew 4.8 percent to $971 billion in 2025. Meanwhile, the cost of living across the country grew 3.8 percent for the 12 months ending in April. The price of gas alone increased 12.8 percent in a single month due to the U.S. war in Iran. For Gen Z, who are generally trying to do more with less income, all of this comes to a head.
Even so, fraud perpetuates the problem. "Insurance is supposed to accurately match rates to risk," said DeLong, who added that fraud throws a wrench in a system that's already operating in a way that can be unfavorable to consumers.
Instead of using AI to get ahead, he suggests any consumer who feels they've been unfairly treated by their insurance company should reach out to their state's insurance department and file a complaint. "The state insurance department is in charge of protecting consumers, making sure that insurance is affordable, making sure that consumers get treated fairly and that they aren't subject to unfair discrimination. This is their job."
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