More people than the state reports have fraudulent car insurance

Sep 17, 2013

Secretary of State Ruth Johnson yesterday announced a new effort to crack down on car insurance fraud. Specifically, she, with the head of the State Police and Michigan’s Financial Services Director, are going after those who sell or use fake insurance.

Evidently this turns out to be a far bigger problem than anyone imagined. The state chose one day -- in this case, July 31st -- and reviewed all the paper insurance certificates it collected. In Wayne County, where nearly one fifth of all Michigan residents live, more than one-fourth of all insurance certificates were phony.

But before you say, “What else would you expect from Detroit?” consider this: In far-way Chippewa County, in the Upper Peninsula, 60 percent of certificates were fraudulent. Statewide, the figure was 16 percent on that day.

Well, cracking down on car insurance fraud is, of course, a good thing. For one thing, this means we poor fools who still pay for real insurance are undoubtedly being made to pay extra to cover for those defrauding the system.

For another, people who try to fool the state to save a few bucks are putting other people -- their families, for example -- at risk, since they aren’t really covered.

But to some extent, the state yesterday looked like a health department task force announcing it was going to do everything it could to fight scurvy … except provide people with more Vitamin C.

Most things in life, including this, are largely about money. To his credit, State Financial Services Director Kevin Clinton was the only one who used the dreaded C-word: Cost. He suggested indeed that the cost of insurance was one factor contributing to the fraud. Well, what do you know … Of course it is a factor!
In fact, when I first heard that the Secretary of State was going to get tough on car insurance scams, I thought this would be something else.

Last week, I talked with a new member of my faculty at Wayne State, a young woman from Iowa who got a job here and moved to an apartment in downtown Detroit. She told me with horror that for her one small car she was being asked to pay more for insurance than her entire family was paying for three cars back in Iowa. “Welcome to Detroit,” I said.

What I almost said was -- too bad you don’t have a mother or a boyfriend in Farmington Hills. I know other young people like her who have moved back to Detroit, to Midtown or other reviving areas. And many of them are committing another kind of insurance fraud. They list another address on their driver’s license than the one where they really live, most often the address of their parents. This gets them lower rates, but has political implications as well.

In Michigan, you have to vote where your driver’s license says you live. These young people may be taking part in rebuilding Detroit, but are politically disenfranchised from taking part in elections there.

Car insurance rates are certainly behind much of our car insurance fraud. Maybe it is time for our leaders to really look at this, and do more than just treat the symptoms.   

Jack Lessenberry is Michigan Radio’s political analyst. Views expressed in the essays by Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.