Carriers See Higher Claims Severity Amid Medical, Social Inflation and Growth in AI‑Generated Fraud
Carriers across North America are reporting higher claims complexity and rising costs as medical inflation, litigation behavior and emerging AI‑enabled fraud reshape the claims environment, a new report shows.
According to Gallagher Bassett’s 2026 Carrier Report, 64% of North American carriers report increased claims complexity over the past year. Medical inflation remains the most frequently cited driver of rising costs, with 56% of respondents identifying it as the top contributor. Longer recovery durations, extended wage replacement periods and a growing number of psychological injury claims are adding pressure to adjusters already managing heavier caseloads.
Gallagher Bassett’s findings are drawn from a global survey of carrier executives, underwriting leaders and claims professionals, with data and market analysis across North America, Europe, Asia‑Pacific and the U.K. Insights include quantitative survey responses and qualitative input from leaders responsible for claims, risk and operational strategy.
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“The percentage of workforce 50 or 55 and up is increasing,” Kapil Mohan, chief client officer for Gallagher Bassett’s risk management and carrier practice, said in an interview with Claims Journal to discuss the report.
With adjusters facing heavier caseloads and more complex injury profiles, carriers are placing greater emphasis on the quality of initial claim reviews, he said.
“It’s making sure that the upfront evaluation of all these claim factors is as thorough and robust as possible,” Mohan added.Liability lines continue to feel the impact of legal system trends. Nearly half of North American carriers cited social inflation and litigation pressures as major contributors to rising severity. Large verdicts, prolonged disputes and coordinated plaintiff strategies are reshaping outcomes across general liability, property and auto liability.
“There tends to be egregious verdicts that are often disproportionate to the underlying liability,” Mohan said.
AI‑enabled fraud is emerging as a newer cost driver. Technology‑related fraud or AI manipulation has contributed to rising claim costs, with 42% of North American carriers reporting that AI and digital tools are being exploited for fraudulent activities. Nearly half of respondents reported suspicious or fraudulent claims linked to AI‑generated documentation.
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“It’s so easy today to use AI to generate fake invoices,” Mohan said. “Whether it’s inflated or completely made up—whether it’s invoices related to repair of property and vehicles, whether it’s invoices related to medical treatment. And so that is important. You can also using AI generated images of fake accidents and make it seem like there was a terrible accident and that’s the vehicle you own.”
Carriers are responding with expanded investments in fraud detection tools, including image‑forensics systems, geo‑tagging validation and document‑authentication technology, according to the report. Beyond fraud detection, carriers are also incorporating generative AI into routine claims handling to improve accuracy and reduce cycle times.
“They’re already using generative AI to handle some part of the claim process, and some of that includes validating documentation, extracting insights from the different documents, summarizing complex documents and claim files,” Mohan said. “A lot of this is improving accuracy and shrinking claim duration.”
AI‑driven predictive analytics is used by 76% of carriers globally, and fraud detection technology is used by 71%, making them the two most widely adopted tools across markets. In North America, generative AI is being used for fraud detection by 67% of carriers, a 16‑point increase from last year, the report shows.
“I think the ability to recognize deep fakes when it comes to images – fraudulent invoices – that’s where the technologies are most prevalent today,” Mohan said.
Workforce shortages remain a defining constraint. Difficulty finding qualified candidates is reported by 68% of global respondents, with claims management, specialized case management and customer service among the most affected areas. Carriers are investing in training, development and compensation to improve retention, but they’re also sharpening how claims are evaluated on the front end as complexity rises, according to the report.
“They’re utilizing data and decision support tools to flag risk factors that may not be obvious to the human, and then deploying appropriate resources, especially things like early intervention or strategies to transfer risk to providers that offer that service,” Mohan said.
The report reflects that efforts to manage volatility continue across underwriting and claims operations. Enhancing risk assessment and modeling is the primary strategy for countering social inflation among North American carriers, with 58% identifying it as their top approach. AI‑driven predictive analytics and fraud detection technology remain the most widely used tools for managing medical cost trends.
The report points to a structural shift rather than a temporary spike, with carriers working to manage rising costs, legal pressures and rapid technological change while maintaining stability for policyholders.
Ferraro is a Claims Journal intern who is working on a B.A. in journalism from California State Fullerton University. He expects to graduate in May. He is also creative director for CSUF’s Tusk Magazine and is a staff writer at the school newspaper The Daily Titan.