Auto insurance claim question

What is the name of your state? INDIANA

I'm in an interesting predicament and intersted to see what the group
thinks:

In early December 2003, I was waiting in a right-turn lane and was
behind another vehicle who was pulling out. Just then, she hit her
brakes and we touched bumpers. We both got out to look at the contact
point. I saw no damage but she wanted to pull into a parking lot and
look closer, so we did.

At that point she felt that there were some light scratches on her
plastic bumper. We agreed that none were seen on the front of my
vehicle. From my perspective, these scratches were only seen after
rubbing off a lot of dirt from the car, and were very light. Something
like a rough buffing. Further, they covered the entire length of the
bumper, not just in the center where I had expected to see something,
if anything. Just in case, I took some (admittedly low-quality)
photographs with my camera phone.

She felt the need to call the police to take a look. Upon arrival, he
stated he could see no damage and therefore did not file a State of
Indiana Accident Report (the damage must be over $1000 to do so).
After some complaining by her, the officer suggested that she have the
car checked out and send me the amount for payment. We left the scene
and I didn't hear anything from her for some time. After awhile I
assumed she realized it wasn't worth the effort.

In early March, she contacted me with a written estimate from a local
body shop claiming the bumper must be removed and resprayed, totaling
nearly $300. I responded and asked her to send some detailed
photographs showing damage in order for me to pay. She sent two
photos, but they did not show any damage whatsoever. I wrote her back
and told her that I was no longer interested in compensating her
directly.

She's now contacted my insurance company directly, and they've called
to ask if I had any intentions of paying.

What should I do? Should I let her claim go to my insurance for
review? If so, what's the chance it would be accepted or denied by the
adjuster? Does she have to demonstrate some actual damage to have a
successful claim? Would my premium likely increase? In my heart I feel
that she is being a bit fradulent and just trying to get some money
out of me for what was already there.

Thoughts are greatly appreciated!
MJD