AI-Led Automation Can Help OEMs Reduce Warranty Fraud By 10x

The OEM aftermarket industry faces huge losses because of warranty fraud. Every year, OEMs have to spend 3%-10% of their total warranty cost on fraudulent claims, which may look small in percentage but amounts to $25 billion in figures. 

Moreover, fraudsters are improving their methods to defraud OEMs. They are finding tactics to commit fraud, which makes it difficult for OEMs to identify them. Some warranty frauds that OEMs have already reported include fraudsters using false invoices, tampered spare parts, and even persuading technicians to double-charge OEMs.

In the past few years, OEMs have seen the number of phantom claims increase exponentially. These claims include dealers charging for labour and parts that were never utilised in the equipment.

With the increase of warranty fraud in the aftermarket, it only makes sense for OEMs to take strict measures against it. While traditional approaches may have been efficient to some levels, automating the entire claims processing operation with AI remains the most effective and feasible option in 2026 and beyond.

How AI can Help OEMs in Reducing Warranty Frauds

AI-led automation is already helping organisations all around the globe and across multiple sectors to prevent fraud. According to statistics, 90% of financial institutions are now AI-protected to detect new fraud tactics in real-time. The OEM industry still needs to catch up on AI-led automation. 

Another reason why AI automation is imperative for OEMs is that fraudsters are adopting AI to commit theft. AI-generated invoices and voiceovers are some of the key tactics that are used to approve illegitimate warranty claims.

By integrating AI in their claims processing workflows, OEMs can detect these frauds in time and prevent losses in terms of reserve logistics cost, wasteful parts cost, and inflated labour costs. 

Here’s What AI-Based Warranty Fraud Detection Looks Like:

1. Automated Error-Free Validation

The manual claims process is costly and time-consuming, but what makes it absolutely worse is that it leaves scope for manual errors. With automated claims processing, the warranty fraud detection system can automatically verify warranty terms & conditions, VINs, serial numbers, purchase dates, billing addresses, owner name, service history, and more. 

1. Predictive Analysis

An AI-based warranty fraud detection system monitors historical and real-time claims data to predict fraudulent claims. It studies the costs of various parts and services included in the claim, the type of claim, and service history to detect any anomalies and report those claims as fraudulent. 

1. Suspicious Behaviour Recognition

Because of dealer negligence, service agents, technicians, and managers can also end up submitting falsified information. AI can recognise such suspicious patterns as repeated submissions from a single filer or duplicate orders for a single part and report them. Additionally, these patterns can be tracked across the entire system, making it impossible for claim filers to bypass the system with new accounts. 

1. Adaptive Learning

Based on the level and type of fraud detected, AI can raise alarms in warranty claims and suggest manual preventive measures to OEMs. It can study the OEMs’ claims processing patterns and suggest improvements. Likewise, it can learn patterns and get more accurate at distinguishing fraudulent claims from genuine claims. 

1. Increased Transparency

By auditing claims data, detecting fraud on a single system, and suggesting preventive measures, AI-led automation ensures a certain level of transparency to the OEMs. This makes it difficult for internal employees to bypass the system and think of new fraud tactics, ensuring secure operations for the long term. 

Why Other Warranty Fraud Detection Approaches Fail?

Warranty frauds aren’t new. OEMs have been facing them for decades. With newer technology, they were able to keep fraud in check, but today, it is difficult to reduce it without having AI-enabled tech. 

1. Increased Market Penetration

In comparison to the early 2000s, OEMs now manufacture and conduct business operations in multiple regions. To provide the best services to customers while keeping feasibility and market dynamics in check, OEMs are introducing varying warranty conditions for each and every region. Additionally, preventing fraud detection in a huge network of dealers that spans continents becomes difficult. Even integrating multiple fraud detection software cannot help because of inconsistencies in data and alarms.

1. Complexity in Warranty Terms

With time, warranty terms and conditions have gotten complex. This is strategically done by OEMs for several reasons, such as to build trust in customers, give product assurance in new regions, or simply compete with strong players. However, the more complex the warranty terms get, the easier it gets to find loopholes. The only solution to this problem is AI automated claims validation.

1. Scope for Manual Errors

With manual claims processing, OEMs have to process so many details, including purchase details, VINs, customer details, warranty terms, billing addresses, and more. This leaves a huge scope for manual errors. When the number of claims increases or employees feel overburdened, claims approval mistakes, false positives, or warranty fraud are likely to happen.

5. Unauthorised Repairs and Spare Parts

The aftermarket is saturated with multiple players, with third-party suppliers selling identical spare parts at lucrative pricing to attract customers. Many times, vehicles and other equipment break down because of these unauthorised servicing and spare parts. However, because of identical parts and the absence of order history in OEM data, it becomes difficult to detect such fraudulent claims, and OEMs end up paying from their own profits.

AI-Automation Implementation Roadmap for Warranty Fraud Detection

For leveraging AI in your warranty management operations, OEMs can follow the given roadmap.

Step #1: Select an AI-powered Warranty Management System

The first and foremost step is investing in an AI-powered warranty management software. While the number of such solutions is less in the market, not every solution has mastered AI. Additionally, you need to look for a solution that is easy to migrate to, cost-effective, and reliable.  Intelli Warranty is one such system that you can consider. 

About Intelli Warranty

Intelli Warranty is an AI-based warranty management software developed by Intellinet Systems, a leading aftermarket solutions provider for the past two decades.

While Intelli Warranty is capable of handling warranty claims processing at a broader level and comes with a comprehensive set of features, including dealer claim submission, damage estimates, audit trailing, etc., we are going to focus more on its AI-based fraud detection.

• Anomaly Detection

Intelli Warranty uses an anomaly detection framework that keeps checks on multiple variables. In case of any anomaly in these variables or their relations with each other, it directly alerts the OEM. 

Variables monitored by Intelli Warranty

• Service records
• Proximity to the end & start of the warranty period
• Claim costs
• Claims-to-Claims Ratio
• Part replacement frequency
• Part failure records
• Dealership reputation and frequency
• Geography and demographics
• Seasonal claim spikes
• Geotagging
• Metadeta 

Based on all these variable checks, Intelli Warranty also provides an anomaly detection score.

• Claim-level Checks

Intelli Warranty runs multiple checks on each claim to identify if the claim is genuine. These checks include:

• Claim amount vs. average amount for similar repairs
• Claim frequency per VIN, per dealer, per customer
• Claim submission timing
• Backdated claim indicator (submission date vs. repair date)
• Repeated part replacements within short intervals
• Repair duration anomalies (time taken unusually short/long)

• Equipment and Part History Checks

Apart from claim-level checks, Intelli Warranty runs multiple types of checks on equipment and spare part levels.

• Odometer reading at claim vs. expected usage
• Part failure rate vs. baseline
• Service history consistency (gaps, skipped services)
• Warranty coverage status 
• Equipment age & mileage vs. typical claim distribution

• Dealer and Customer Behaviour Checks

To ensure complete fraud prevention, monitoring dealer and customer behaviour is important. It helps maintain the integrity of internal teams as well.

• Dealer claim frequency vs. standard
• Geographic clustering
• Labor hours billed vs. actual norms
• High rejection ratio or unusually high approval ratio
• Customer claim history (multiple equipment, repeated warranty use)
• Same address/phone number for multiple claims
• Patterns across VINs linked to the same customer

• Parts and Inventory Co-relation

To detect double-billing and false invoices, Intelli Warranty can monitor inventory levels in real time.

• Claimed part availability in inventory (phantom part claims)
• Mismatch between the failed part and the equipment configuration
• High-value part claims vs. low-value equipment

• Seasonal Fraud Prevention

To rule out any seasonal fraud, Intelli Warranty’s AI-based fraud detection keeps a check on the following factors as well:

• Seasonality of claims 
• Claim filed soon after warranty registration (possible misuse)
• Comparison with peer group patterns (similar models, age, geography)
• Claims filed just before warranty expiry

• Image/Document Forensics

Warranty claim files and documents can also help OEMs identify warranty fraud. Intelli Warranty takes care of the following as well:

• Image authenticity (metadata, geolocation, timestamp)
• Duplicate image usage across claims
• Inconsistencies in service invoices/scanned docs

Step #2: Set a Deployment Timeframe

Selecting the software is not enough. Even after purchasing, you will need to discuss and set a realistic deployment timeframe with your solution provider. Once the solution provider sets up the warranty fraud detection software, you will need time to integrate it with your existing tools or import data using Excel sheets. Meanwhile, you will need to manage claims via your old software. That’s why it is better advised to devise a realistic deployment timeframe and share it with your software provider.

A trustworthy provider will be understanding of your requirements and can provide you with an easy rollout plan so that you can conveniently switch to your newer platform without any interruptions in your existing workflow. 

Step #3: Create Test Claims

Prepare multiple test claims for the software. These can be a mix of genuine and verified claims, and false claims. Your in-house teams can create these claims and file them in the system. Based on the information provided, the solution will perform all the checks and help you detect fraudulent claims. This way, you can also check the accuracy of the software and understand its functioning in depth.

Step #4: Import Claims Data

After verifying the system’s performance, migrate the entire data to your new AI-based warranty fraud detection solution. You can either migrate with the help of your in-house team or approach the solution provider for paid migration support. However, it is best if you select a system that supports data migration from existing ERPs, CRMs, warranty management solutions, and other software. Fortunately, Intelli Warranty supports all ERPs and business tools.

Conclusion

Millions of warranty frauds occur every year and deplete the warranty budgets of OEMs. While all traditional approaches may fail to control the various factors and variables contributing to the fraud, AI-led automation can help. Instead of doing things manually, such systems make artificial intelligence responsible for detecting fraud. 

AI is always learning and gets better at detecting fraudulent claims, helping OEMs save hundreds of thousands of dollars every year. With eliminated chances of manual error and workplace integrity, OEMs can establish strong relations with their dealer network and provide customers with the quality service they deserve.

In the end, managing warranties and detecting fraud is very important for any OEM. Thus, in order to grow or even stay relevant in modern times, opting for an AI-based warranty fraud detection software is a must. 

FAQs

What is a warranty fraud?

Warranty fraud includes when an individual files a false claim with the help of a fake invoice, unauthorised spare parts, or other methods to defraud the OEM. Warranty fraud causes OEMs billions in losses every year.

How to prevent warranty fraud?

Warranty fraud prevention requires OEMs to stay agile. They need to adopt strict policies across their entire dealer network and keep multiple checks in the warranty claims process. For this purpose, several warranty management software are available in the market.

How does AI help prevent warranty fraud?

AI brings next-level automation in the process. It can keep tabs on warranty dates, claim filer information, repeated claims, cost of claims, inventory correlation, etc. It can also identify fraudulent patterns and alert OEMs.

Which AI-based solution is the best for warranty fraud detection?

Although there are multiple warranty fraud detection software available in the market, not all of them have advanced AI capabilities. Intelli Warranty is one such solution that meets the criteria. It can help OEMs with audit trailing and automate claims processing with multiple AI checks on spare parts, date of warranty, cost of claims, and other measures.