Images generated by artificial intelligence are fuelling a new wave of insurance fraud, as customers use them to make false claims for items that never existed. 

Insurance giant Admiral says it detected a 71 per cent rise in fraudulent insurance claims last year, amounting to £86.8million in motor, home and travel claims.

This has been driven by some of its customers using AI to generate realistic photos to exaggerate or fabricate claims, it said. 

It shared some of the most shameless examples of these images with This is Money.

In one case, a customer submitted an AI-generated image of a watch on their wrist, telling Admiral it was stolen while they were waiting at a bus stop.

AI was used to generate a diamond-set gold watch, below, although the image did not appear realistic and the customer could provide no other evidence that the watch existed.

Another fraudster used AI to add different registration plates to the same picture of a damaged Land Rover.

This was relatively easy for Admiral to spot because the culprit used the same image to attempt claims on multiple policies, changing the numbers on the plate each time.

A Mercedes driver tried his luck with Admiral Insurance by using AI to doctor a picture of his car, making it appear damaged.

The insurance company's fraud team discovered that the shading in the damaged area wasn't quite right and concluded it had been fabricated.

Another brazen fraudster was caught lying when Admiral found the photos of the customer's 'broken' luggage on Google Images.

The customer had found an image of a broken suitcase in a stock photo library, and used this to support her claim that her suitcase was damaged by an airline.

And while these cases seem harmless, Admiral has warned that using AI to exaggerate an insurance claim could land you in jail.

Its research suggested that one in eight people have exaggerated an insurance claim in the past.

A quarter of Britons say they have been tempted to exaggerate a claim to get more money, and 27 per cent don't realise that exaggerating a claim constitutes insurance fraud.

Photos also show painfully obvious use of AI or Photoshop to fabricate damage to an insurance customer's shoes.

This customer told Admiral their upstairs neighbour had building works, and that this caused parts of the ceiling to fall onto their shoes.

Closer inspection showed that the 'ceiling' part that had damaged the shoe was the same for every shoe and every photo – and the fraudster was quickly rumbled. 

Jon Radford, head of intelligence, investigations and data services at the Insurance Fraud Bureau said: 'Insurance fraud might look like an easy way to try your luck, but the consequences are anything but. 

'Anyone caught faces being placed on the Insurance Fraud Register, making it extremely difficult to get insurance in the future, not to mention the real risk of fines or even a criminal conviction.'

Sian Davies, head of financial crime prevention at Admiral added: 'We have experts in all our product teams who are skilled at detecting fraudulent claims and we work closely with the industry to spot emerging trends, including AI-driven fraud, so genuine claims can be handled quickly and fairly. 

'If you're ever unsure about what to include in a claim, it's always best to ask.'