A familiar phrase often surfaces in compliance and risk discussions across the insurance sector: “This product isn’t regulated for AML, so we don’t need to monitor it.” In many markets, that assumption is supported by existing rules. Regulatory frameworks largely focus on life insurance policies, while non-life products such as motor, property, travel, and liability insurance rarely fall within formal AML requirements.
However, regulatory scope does not limit risk scope. Insurance firms that treat regulation as the boundary for AML oversight may be leaving themselves open to significant and preventable exposures, especially as criminals increasingly search for overlooked entry points in the financial system.
With this in mind, SymphonyAI explores why compliance teams should reconsider any approach that ignores unregulated product lines.
The common misconception
The idea behind this misconception is simple: if AML rules do not apply, the logic suggests there is no need to invest in monitoring.
It is a particularly common viewpoint within insurance portfolios that include both life and non-life products, where companies channel most of their KYC, CDD, and transaction-monitoring efforts into regulated life blocks.
In many cases, they rely on anti-fraud controls for non-life policies and consider that sufficient protection, instead of extending a more robust AML strategy across the business.
Inside the criminal process
Yet regulation is not a proxy for risk. Criminals do not follow classification frameworks or wait for AML rules to catch up. Unregulated insurance products can be especially attractive because they involve large policy volumes and fast-moving, relatively low-value transactions.
Short policy terms, premium overpayments, and cancellations can provide efficient placement and layering opportunities, while limited due diligence processes make it easier to use stolen or synthetic identities.
When payouts are tied to credible events such as theft or physical damage, they can also appear legitimate, even when used to move illicit money.
Some jurisdictions, including India and Taiwan, have already begun expanding AML oversight to parts of the non-life sector as these risks become more visible.
A criminal purchases a commercial cargo insurance policy for a shipment, later cancels it, and receives a refund routed to an offshore entity.
Cargo insurance may not fall under AML rules, meaning the transaction could remain unmonitored and absent from enterprise risk assessments, despite being used to transfer illicit funds across borders.
How insurers are responding
Leading insurers are responding by shifting from a regulation-driven mindset to a risk-driven model.
This includes applying transaction monitoring to selected unregulated lines, using AI tools to spot policy manipulation, refund-based schemes, and repeat behavioural patterns, and consolidating policy data across business units to establish enterprise-wide visibility. This approach helps firms prepare for expected regulatory expansion and offers stronger protection against financial crime.
A compliance strategy based solely on legal minimums leaves firms vulnerable. It increases operational blind spots, introduces reputational and financial risk, and may fail to meet evolving supervisory expectations as regulators begin to evaluate effectiveness, not only technical adherence. As global watchdogs emphasise, organisations are expected to act when risk is identifiable, regardless of regulatory classification.
The risk-based approach outlined by the Financial Action Task Force (FATF) reinforces this principle, encouraging insurers and their intermediaries to assess and understand their exposure so they can allocate resources where risk is highest.
To strengthen defences, insurers can begin by including unregulated lines in enterprise risk assessments, defining red flags for non-life products, leveraging AI to detect anomalies, and building internal awareness that the absence of direct regulation does not remove scrutiny obligations. Documentation of risk decisions and mitigation strategies will also be vital.
Ultimately, the focus must shift from “Are we required to monitor this?” to “What is the risk if we don’t?” As criminals diversify their methods, unregulated insurance products may quickly become a key weakness in AML programmes. Proactive and intelligence-driven detection can help transform today’s blind spots into tomorrow’s competitive strengths.
Read the full blog from SymphonyAI here.
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