State officials and law enforcement in Michigan are sending astrong message to those who provide fraudulent auto coverage andthe drivers who purchase their policies.

On Monday, Secretary of State Ruth Johnson announced aninitiative for which her office will work with the Michigan statepolice, local prosecutors and the insurance industry toaggressively ferret out scammers. In forming the collaboration,Johnson hopes to quell the rising incidence of auto insurance fraudin recent years.

The initiative could perhaps not come at a better time. Lastyear, Johnson's office began receiving digitized insurance reportsfor the first time, and the insight into the extent of the problemcan only be described as astounding. During a press conference,Johnson reported that a one-day snapshot (below right) of 3,400auto registration renewals using paper insurance certificatesshowed that 16 percent—or more than 500—were bogus.

The offense is most pronounced in the Michigancounties of Chippewa, Van Buren and Sanilac, where at least 46percent of insurance certificates presented for verification ineach county were fabricated. State officials stress that, as withother types of insurance fraud, these scams are growing insophistication.

"Many of the fake insurance certificates look legitimate," saidJohnson. "So it's very hard for our staff to identify fromappearance alone that they are fakes. One scammer had the audacityto actually set up a help desk where someone would answer the phoneand verify phony insurance when our branch staff called."

Experts currently estimate that auto insurance fraud anduninsured drivers are passing along about $200 million in higherinsurance premiums to other Michigan motorists. Under state law,the use or sale of phony auto insurance certificates can beprosecuted as a felony. However, scammers seem relativelyundeterred, made evident by the sky-high increase in vehicleregistrations containing false insurance certificates thisyear—more than 4,000 thus far compared to just 431 in all of2011.

Another Flawed No-Fault System

Some consumer advocates blame exorbitant auto insurance ratesstemming from Michigan's no-fault system for the burgeoningcriminal undercurrent. But it would be shortsighted to discount theinfluence of the vitriol being lobbed at the entire insuranceindustry.

Butch Hollowell, general counsel for the NAACPin Detroit, told a local news source that drivers are "being dupedby the industry, which is charging them rates far in excess of whatthey should be charged." The former insurance consumer advocate forthe state added that Johnson's measure will "do absolutely nothingto help solve the underlying issue, which is affordability."

"[Instead] it will force more people off of insurance and createan even worse driving environment," he said.