A new industry report indicates that insurance carriers across North America are facing higher claims complexity and rising costs. Medical inflation, litigation behavior, and the growth of AI-enabled fraud are contributing to increased severity in claims handling.
According to Gallagher Bassett’s 2026 Carrier Report, 64% of North American carriers say claims complexity increased during the past year. Medical inflation remains the most frequently cited cost driver, with 56% of respondents identifying it as the leading contributor.
The report draws on a global survey of carrier executives, underwriting leaders, and claims professionals. It includes quantitative survey data and qualitative insights from leaders responsible for claims, risk, and operational strategy across North America, Europe, Asia-Pacific, and the United Kingdom.
Medical Costs and Claim Duration Continue to Rise
Medical inflation continues to affect claim severity across multiple lines. Carriers report that longer recovery periods and extended wage replacement durations are increasing overall claim costs. In addition, claims involving psychological injuries are becoming more common.
Kapil Mohan, chief client officer for Gallagher Bassett’s risk management and carrier practice, noted that workforce demographics are also influencing claims management.
“The percentage of the workforce 50 or 55 and up is increasing,” Mohan said in an interview discussing the report.
At the same time, adjusters are managing heavier caseloads and more complex injury profiles. As a result, carriers are placing greater emphasis on early claim evaluation.
“It’s making sure that the upfront evaluation of all these claim factors is as thorough and robust as possible,” Mohan said.
Litigation Trends Contribute to Higher Liability Severity
Legal system trends are also affecting claim outcomes. Nearly half of North American carriers report that social inflation and litigation pressures are major contributors to rising claim severity.
Carriers are observing large verdicts, extended legal disputes, and coordinated strategies among plaintiffs. These factors are influencing outcomes across general liability, property, and auto liability claims.
“There tends to be egregious verdicts that are often disproportionate to the underlying liability,” Mohan said.
AI-Enabled Fraud Emerges as a Cost Driver
The report identifies AI-enabled fraud as an emerging challenge for carriers. Technology-related fraud or AI manipulation is contributing to rising claim costs, with 42% of North American carriers reporting fraudulent activity involving AI or digital tools.
Nearly half of survey respondents say they have encountered suspicious or fraudulent claims involving AI-generated documentation.
“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.”
He also noted that AI can generate images designed to simulate accidents.
“You can also use AI-generated images of fake accidents and make it seem like there was a terrible accident and that’s the vehicle you own,” Mohan said.
Carriers Expand Fraud Detection Technology
Carriers are responding to these risks by expanding investments in fraud detection tools. According to the report, organizations are adopting image forensics systems, geo-tagging validation, and document authentication technology to identify suspicious claims.
At the same time, carriers are integrating generative AI into routine claims processes. Organizations are using the technology to validate documentation, extract insights from claim files, and summarize complex documents.
“They’re already using generative AI to handle some part of the claim process,” Mohan said. “Some of that includes validating documentation, extracting insights from the different documents, summarizing complex documents, and claim files.”
He added that these tools can improve accuracy and reduce claim cycle times.
Predictive Analytics and Fraud Detection Lead AI Adoption
Across global markets, predictive analytics and fraud detection technology are the most widely adopted AI tools in the insurance sector.
The report finds that 76% of carriers worldwide use AI-driven predictive analytics, while 71% rely on fraud detection technology. In North America, 67% of carriers report using generative AI specifically for fraud detection, up 16 points from the previous year.
Mohan said that technologies designed to identify manipulated images and fraudulent documentation are among the most commonly used.
“I think the ability to recognize deep fakes when it comes to images, fraudulent invoices, that’s where the technologies are most prevalent today,” he said.
Workforce Shortages Continue to Affect Claims Operations
Staffing challenges remain another constraint for insurers. The survey reports that 68% of global respondents have difficulty finding qualified candidates.
Claims management, specialized case management, and customer service roles are among the most affected areas.
Carriers are investing in training programs, professional development, and compensation adjustments to improve retention. They are also relying on data and decision-support tools to strengthen claim evaluations.
“They’re utilizing data and decision support tools to flag risk factors that may not be obvious to the human,” Mohan said. He added that these tools can help deploy appropriate resources such as early intervention strategies or specialized service providers.
Carriers Focus on Risk Assessment to Manage Volatility
The report indicates that carriers are refining risk management strategies as cost pressures and technological changes continue.
Among North American carriers, 58% identify enhanced risk assessment and modeling as the primary strategy for addressing social inflation. Predictive analytics and fraud detection tools are also widely used to help manage medical cost trends.
Gallagher Bassett’s report suggests that the current claims environment reflects broader structural changes. Carriers are responding by adjusting underwriting and claims practices while managing rising costs, legal pressures, and new technological risks.
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