Michigan Officials: Many Drivers Using Fake Insurance Documents

Michigan recently passed a law allowing insurance companies to electronically notify the state whenever a motorist renews their auto policy. The idea behind the law was to make it easier for motorists to be able to renew their vehicle registration online.

But another consequence of the law was the revelation that many people, all across Michigan, were passing off fraudulent insurance documents when they renewed their vehicle registration, although it was unclear just how many people were submitting phony insurance papers to the state.

To find out, the secretary of state, which operates Michigan’s Department of Motor Vehicles, ordered a one-day investigation. Every paper insurance document would be inspected and verified during a 24-hour period. Staffers called on every document, or verified electronically whether it was an company-issued copy.

At the end of the day, the findings were “troubling,” according to the secretary of state’s office: 16 percent of all documents turned into the Secretary of State’s office were forged or fraudulent.

“We were aware to some degree that it was going on, but certainly not to the extent of what was going on,” said Fred Woodhams, spokesman for Secretary of State Ruth Johnson.

According to Woodhams, these counterfeit documents were sold on Craigslist, by unscrupulous auto dealers, and even door to door by salespeople.

“I would caution that in some cases people were buying insurance certificates unknowingly,” Woodhams said. “Sometimes [these scams] have been quite sophisticated, with rings even setting up a call center to perpetrate the fraud.”

To combat this widespread insurance fraud, Johnson recently announced immediate changes:

  • Fraud ring organizers and participants would be referred for arrest and prosecution.
  • Motorists with phony insurance documents would have their vehicle registration canceled. Those motorists would also forfeit their registration payment.
  • Staff would be trained in identifying fraudulent insurance papers.

“This is not an urban or regional problem,” Johnson said in a statement. “We had fakes and forged copies turn up in more than half of Michigan’s 83 counties.”

“We are going to put the brakes on the criminals who are selling this stuff and are preying on unsuspecting Michigan drivers,” she added.

So far in 2013, more than 4,300 drivers have seen their registration canceled after passing fake insurance papers, 10 times the amount of that were canceled in 2011.

High Costs Driving Fraud

While Michigan looks to stop the flood of phony certificates, consumer and insurance industry advocates are noting the high auto insurance costs in the state.

Michigan ranks as the 8th most expensive state for standard premiums, according to the National Association of Insurance Commissioners. Other rankings list Michigan as the second-most expensive state for car insurance premiums.

“Insurance in Michigan is expensive because of our unlimited life time benefits,” said Insurance Institute of Michigan spokeswoman Lori Conarton. “With that high costs comes a demand for ways to skirt the system. And with new technology, they can make fraudulent certificates look pretty legitimate.”

Conarton said the average cost for an insurance policy in Michigan is $1,783 per vehicle. That price increases “by a lot”, Conarton added, if the policyholder lives in Detroit.

The secretary of state acknowledges that Michigan motorists pay much more than other states for their no fault insurance policies, but spokesman Fred Woodhams warns that should be an excuse “for people to cheat the system.”

“The average cost to register a car in Michigan is about $400,” Woodhams said. “And motorists that provide phony documentation are going to lose that money, and will have to pay it again before their car is registered. And rings or other fraud leaders will be prosecuted.”

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