The country's fifth-lowest insurance rates draw them here, and the state does not require a North Carolina driver's license or proof of address to register vehicles and get tags.

State officials say this rapidly growing form of insurance fraud has prompted hundreds of complaints in recent months, mostly from residents in the Northeast tattling on their neighbors. Scammers are hard to find, and officials are launching a multistate task force.

"I'm flooded with them in my own town. I mean, flooded with North Carolina tags," said Douglas Fisher, a state legislator from Bridgeton, N.J., who has proposed tougher penalties for New Jersey residents with out-of-state license plates. "You can go sit on some streets and it appears that no one lives here."

The potential losers are North Carolina drivers, whose insurance premiums are affected every time a fake North Carolinian crashes a car in the Bronx.

"We can say with a great degree of confidence that it is a massive problem," said Chrissy Pearson, spokeswoman for N.C. Insurance Commissioner Jim Long. "The trick now is just determining what the best way is to tackle that problem."

State officials don't know precisely how widespread or costly the problem is, and they are just starting to track and investigate the complaints more systematically.

The "rate evasion" scam can work many different ways, but out-of-state drivers often start at the insurance office, said Shane Guyant, an investigator at the N.C. Department of Insurance.

They provide a fake address to the insurance agent in North Carolina, using falsified lease documents, a mail drop, or the home of a friend. Once they have proof of insurance, they can register their cars through the N.C. Division of Motor Vehicles.

On average, New Jersey drivers can save more than $600 a year per car by getting insurance here. Compare rural North Carolina areas with the most crowded cities of the Northeast, and the difference is even bigger.

Others come to North Carolina because they are illegal immigrants who want license plates. For years, North Carolina had a reputation as an easy place for illegal immigrants to get driver's licenses. That's tougher to do now, but the state still accepts certain foreign documents as proof of identification for registering a car.

Hard to detect

In North Carolina, to register a car, drivers must show proof of insurance and identification. But under state law, insurance agents cannot refuse to write a policy to North Carolina residents, and agents cannot always identify false documents, Guyant said.

That makes catching fraud at the insurance office difficult until an out-of-state driver gets in a wreck and files a claim, said James Kennedy, executive vice president of the Professional Insurance Agents of North Carolina.

"They will use a brother, a sister, a grandmother's or a friend's address here in Charlotte or Raleigh and Greensboro," he said.

'The easiest state'

Rate evasion isn't new, although it's hard to know exactly how common it is nationally. For years, drivers have fled high insurance rates, particularly in New York and New Jersey, where the average cost of car insurance topped $1,300 in 2003, according to the National Association of Insurance Commissioners. Philadelphia residents went to suburban New Jersey. New York City residents went to upstate New York. Many from both states went to Pennsylvania.

Tighter laws in those states may have pushed some drivers to North Carolina.

Next page >

Get $150+ in coupons in every Sunday N&O. Click here for convenient home delivery.