How Gadget Insurers Can Welcome Gen Z Without Welcoming Fraud
This article is by Manjit Rana, Executive VP, Insurance at Clearspeed
The UK is already Western Europe’s largest mobile insurance market. With 95% smartphone penetration and top-end phones now costing over £1,200, demand for policies continues to rise, up from 7.87 million in 2023 to 8.46 million in 2024.
Here, Gen Z and millennials have become a key growth demographic. Indeed, gadget insurance is often the first policy that young customers purchase. However, such customers expect their claims experiences to be fast, transparent, and digital–much like the modern services that they use every day. It’s imperative for insurers to meet these demands: provide leading customer experiences, while combatting rising fraud.
FCA General Insurance Value Measures data shows that UK gadget insurance gross written premium income increased from £496 million in 2023 to approximately £604 million in 2024. Driven by a combination of rising smartphone prices and a claims frequency of 5-15%, this represents a 22% year-over-year increase
In 2024, this would have equated to an estimated 660,000 claims. Based on industry estimates, approximately 100,000 of these may have been fraudulent, translating into a financial impact of more than £40 million (with the UK market seeing typical payouts of £435 per claim).
In the UK, stamping out this fraud isn’t straightforward. ‘Lost’ claims typically do not require a police report or crime reference number, so stolen and damaged phones are often reported as ‘lost’ to avoid further scrutiny.
Similarly, legacy claims checks such as evaluating proof of purchase receipts have become increasingly at odds with modern fraud. For example, AI simplifies the generation of fabricated invoices and receipts. Equally, a customer may provide a valid invoice or a plausible account of events, while still misrepresenting how or when a device was actually lost or damaged.
Insurers are also building or acquiring AI automation solutions to help speed up the processing of claims and identify patterns in the data that may signal potential fraud. Ultimately that’s just automating yesterday’s pathways, rather than looking at the challenge from a new perspective – which is the real game changer.
This presents insurers with an awkward dilemma. Gen Z customers expect rapid, often same-day resolutions. Yet insurers cannot afford to relax fraud detection controls that are often slow, resource-intensive, and limited in their ability to detect modern forms of opportunistic gadget insurance fraud.
From a detection mindset to a verification mindset
There are several structural safeguards beyond document reviews. The Recipero database enables insurers to validate unique IMEI numbers against sales or recycling databases to check for fraud, as well as other insurers databases to mitigate the risk of duplicate claims. Network data requests can also be used to check when a phone was last used. This means of validating claimed loss dates and exclusion or “waiting” periods can stop customers from making a claim immediately after purchasing an insurance policy.
However, these measures are far from foolproof. Timing gaps can be exploited by taking out policies and claiming losses shortly after exclusion periods end.
Insurance ultimately depends on trust. The insurer needs to trust that the consumer is providing accurate information during policy purchases and claims. Consumers need to trust that claims will be handled expediently and fairly. However, the trust that insurer-consumer relationships are reliant upon is currently being undermined by the high volume of fraudulent claims, and the fact that traditional fraud detection methods create friction and delays for genuine customers.
Bridging this trust gap relies on new innovations, such as adopting technologies like AI-assisted routing, document verification tools, and privacy-conscious risk assessment solutions.
For example, take voice-based risk assessment. Human vocal characteristics associated with risk are universal, regardless of language, geography, or other demographics. This technology only requires a few simple yes or no questions. Through analysis, insurers can quickly identify low-risk customers. This allows straightforward claims to move faster, while reserving deeper investigations for the smaller number of cases that warrant additional scrutiny.
It is technologies such as these that are transforming insurance assessments, both in their ability to deter fraudulent behaviours and meet Gen Z expectations through the rapid resolution of low-risk claims.
Responsible use of new technologies
With the gadget insurance fraud rate estimated to be around 15%, costing the UK insurance industry more than £40 million in 2024 alone, addressing fraudulent claims that create disproportionate financial damages must be prioritised.
The key lies in prompting individuals to think twice before filing misrepresented claims, as well as identifying fraudulent cases more quickly. Rapid verification technologies such as voice-based risk assessments can achieve this in ways that legacy checks cannot, flagging risks while remaining transparent and defensible under regulatory scrutiny.
Of course, the implementation of such technologies must be used responsibly, not acting as a sole determinant but a powerful risk triage tool that allows the clearing of the majority of cases, as well as focused follow ups. This is particularly important in an industry that is highly complex and stringently regulated, where decision accuracy, trust, and defensibility are vital.
To be considered equally are the FCA’s Consumer Duty expectations of regulated companies to have controls to protect customer data and prevent fraud from arising from misuse of PII.
For insurers, the challenge is to mitigate and identify fraudulent claims, while maintaining a customer experience that meets Gen Z expectations around speed, convenience and fairness. Rising to this challenge relies on replacing legacy checks with new innovations capable of
building and sustaining the trust that underpin successful, mutually beneficial relationships with policyholders. Yet their responsible use and implementation is paramount.
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