State officials and law enforcement in Michigan are sending a strong message to those who provide fraudulent auto coverage and the drivers who purchase their policies.
On Monday, Secretary of State Ruth Johnson announced an initiative for which her office will work with the Michigan state police, local prosecutors and the insurance industry to aggressively ferret out scammers. In forming the collaboration, Johnson hopes to quell the rising incidence of auto insurance fraud in recent years.
The initiative could perhaps not come at a better time. Last year, Johnson's office began receiving digitized insurance reports for the first time, and the insight into the extent of the problem can only be described as astounding. During a press conference, Johnson reported that a one-day snapshot (below right) of 3,400 auto registration renewals using paper insurance certificates showed that 16 percent—or more than 500—were bogus.
The offense is most pronounced in the Michigan counties of Chippewa, Van Buren and Sanilac, where at least 46 percent of insurance certificates presented for verification in each county were fabricated. State officials stress that, as with other types of insurance fraud, these scams are growing in sophistication.
"Many of the fake insurance certificates look legitimate," said Johnson. "So it's very hard for our staff to identify from appearance alone that they are fakes. One scammer had the audacity to actually set up a help desk where someone would answer the phone and verify phony insurance when our branch staff called."
Experts currently estimate that auto insurance fraud and uninsured drivers are passing along about $200 million in higher insurance premiums to other Michigan motorists. Under state law, the use or sale of phony auto insurance certificates can be prosecuted as a felony. However, scammers seem relatively undeterred, made evident by the sky-high increase in vehicle registrations containing false insurance certificates this year—more than 4,000 thus far compared to just 431 in all of 2011.
Another Flawed No-Fault System
Some consumer advocates blame exorbitant auto insurance rates stemming from Michigan's no-fault system for the burgeoning criminal undercurrent. But it would be shortsighted to discount the influence of the vitriol being lobbed at the entire insurance industry.
Butch Hollowell, general counsel for the NAACP in Detroit, told a local news source that drivers are "being duped by the industry, which is charging them rates far in excess of what they should be charged." The former insurance consumer advocate for the state added that Johnson's measure will "do absolutely nothing to help solve the underlying issue, which is affordability."
"[Instead] it will force more people off of insurance and create an even worse driving environment," he said.
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