- Associated Press - Wednesday, September 17, 2014

LANSING, Mich. (AP) - Michigan should create a special authority devoted to targeting auto insurance fraud and require insurers to more frequently send electronic verification of drivers’ insurance to the state, a task force recommended Wednesday.

The panel, created a year ago by Secretary of State Ruth Johnson to investigate ways to reduce insurance fraud, also said the state insurance department should have expanded powers to penalize people operating as insurance agents without a license.

The recommendations were among 17 proposed - some to the Legislature, others proposed as partnerships between state government and the insurance industry, and many to be taken up administratively by Johnson’s department.

She told reporters that in July 2013, 16.1 percent of roughly 3,500 paper certificates presented at secretary of state offices were invalid or phony. A snapshot done last month showed 7.6 percent of nearly 2,400 certificates were invalid, she said.

“Already what we’ve done and the training and working with law enforcement has made a difference,” Johnson said.

Proof of no-fault insurance is required to register more than 7 million passenger vehicles in Michigan each year. Officials said phony insurance affects every motorist because rates can go up to compensate for the injuries of uninsured drivers and passengers.

The call to form an insurance fraud authority is not new. It is included in stalled legislation that would overhaul Michigan’s auto insurance system by cutting premiums and curtailing unlimited medical benefits for people catastrophically injured in crashes.

Pete Kuhnmuench, director of the Insurance Institute of Michigan, a trade group for insurers, sat on the task force. He said the proposed authority - funded with up to $21 million in fees from auto insurers passed along to drivers - would include an existing Automobile Theft Prevention Authority and compile a database of suspected fraud activity and provide funding to law enforcement to reduce fraud. It would be in place for five years and then lawmakers could revisit its effectiveness, he said.

Instead of paying a $1 per vehicle fee, motorists would pay $3, Kuhnmuench said. The proposed fee is backed by the industry and was not specifically outlined in the task force’s recommendations.

He said his organization would like the Legislature to act independently on the fraud authority since the larger no-fault changes are bottled up.

“The potential fraud out there is in the hundreds of millions (of dollars),” Kuhnmuench said. “If we can get at 10 percent of that fraud, it’s a net positive for the state.”


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