<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2003

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from _______________ to ______________

                         Commission File Number: 0-19594

                          INSURANCE AUTO AUCTIONS, INC.
                          -----------------------------
             (Exact name of registrant as specified in its charter)

                     Illinois                                    95-3790111
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or              (I.R.S. Employer
                  organization)                              Identification No.)

850 East Algonquin Road, Suite 100, Schaumburg, Illinois              60173-3855
--------------------------------------------------------------------------------
       (Address of principal executive offices)                       (Zip Code)

                                 (847) 839-3939
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12B-2 of the Exchange Act.) Yes [ ] No [X]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

Number of shares outstanding of each of the issuer's classes of common stock, as
of July 31, 2003:

                   Class                           Outstanding
                   -----                           -----------
      Common Stock, $0.001 Par Value            11,515,166 shares

<PAGE>

                                                            INDEX

                                                INSURANCE AUTO AUCTIONS, INC.

<TABLE>
<CAPTION>
                                                                                              PAGE NUMBER
                                                                                              -----------
<S>                                                                                           <C>
PART I.  FINANCIAL INFORMATION..............................................................        3

Item 1.  Financial Statements (Unaudited)...................................................        3

         Condensed Consolidated Statements of Operations for the Three Month and Six Month
              Periods ended June 29, 2003 and June 30, 2002.................................        3
         Condensed Consolidated Balance Sheets as of June 29, 2003 and December 29, 2002....        4
         Condensed Consolidated Statements of Cash Flows for the Six Month Periods ended
              June 29, 2003 and June 30, 2002 ..............................................        5
         Notes to Condensed Consolidated Financial Statements...............................        6

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of
              Operations....................................................................       10
         Overview...........................................................................       10
         Results of Operations..............................................................       10
         Financial Condition and Liquidity..................................................       12
         Factors That May Affect Future Results.............................................       13

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.........................       16

Item 4.  Controls and Procedures............................................................       16

PART II. OTHER INFORMATION..................................................................       16

Item 1.  Legal Proceedings..................................................................       16

Item 2.  Changes in Securities and Use of Proceeds..........................................       16

Item 3.  Defaults upon Senior Securities....................................................       16

Item 4.  Submission of Matters to a Vote of Security Holders................................       16

Item 5.  Other Information..................................................................       17

Item 6.  Exhibits and Reports on Form 8-K...................................................       17

SIGNATURE    ...............................................................................       18
</TABLE>

                                       2

<PAGE>

                          INSURANCE AUTO AUCTIONS, INC.
                                AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (dollars in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                           THREE MONTH PERIODS ENDED      SIX MONTH PERIODS ENDED
                                                          ---------------------------   ---------------------------
                                                            JUNE 29,       JUNE 30,       JUNE 29,       JUNE 30,
                                                              2003           2002           2003           2002
                                                          ---------------------------   ---------------------------
                                                                  (UNAUDITED)                   (UNAUDITED)
<S>                                                       <C>            <C>            <C>            <C>
Revenues:
     Vehicle sales                                        $     10,192   $     17,059   $     23,496   $     44,810
     Fee income                                                 43,146         42,691         85,882         84,160
                                                          ------------   ------------   ------------   ------------
                                                                53,338         59,750        109,378        128,970
Cost of sales:
     Vehicle cost                                                9,425         14,802         21,196         40,859
     Branch cost                                                32,845         33,001         65,809         64,193
                                                          ------------   ------------   ------------   ------------
                                                                42,270         47,803         87,005        105,052
                                                          ------------   ------------   ------------   ------------
         Gross profit                                           11,068         11,947         22,373         23,918

Operating expense:
     Selling, general and administrative                         7,509          6,937         14,677         14,116
     Business transformation costs                                 921          2,237          1,718          4,186
                                                          ------------   ------------   ------------   ------------

     Earnings from operations                                    2,638          2,773          5,978          5,616

Other (income) expense:
     Interest expense                                              503            476            558            724
     Other income                                                  (43)           (82)          (122)          (139)
                                                          ------------   ------------   ------------   ------------

     Earnings before income taxes                                2,178          2,379          5,542          5,031

Provision for income taxes                                         898          1,023          2,286          2,163
                                                          ------------   ------------   ------------   ------------

         Net earnings                                     $      1,280   $      1,356   $      3,256   $      2,868
                                                          ============   ============   ============   ============

Earnings per share:
     Basic                                                $        .11   $        .11   $        .28   $        .23
                                                          ============   ============   ============   ============
     Diluted                                              $        .11   $        .11   $        .27   $        .23
                                                          ============   ============   ============   ============

Weighted average shares outstanding:
     Basic                                                      11,517         12,226         11,784         12,212
     Effect of dilutive securities - stock options                  60            357             77            305
                                                          ------------   ------------   ------------   ------------
     Diluted                                                    11,577         12,583         11,861         12,517
                                                          ============   ============   ============   ============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       3

<PAGE>

                          INSURANCE AUTO AUCTIONS, INC.
                                AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 (dollars in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                           JUNE 29,      DECEMBER 29,
                                                                             2003            2002
                                                                         ------------    ------------
                                                                         (Unaudited)
<S>                                                                      <C>             <C>
ASSETS

Current assets:
     Cash and cash equivalents                                           $     28,507    $     10,027
     Accounts receivable, net                                                  40,249          45,594
     Inventories                                                               10,175          11,158
     Other current assets                                                       2,671           3,571
                                                                         ------------    ------------
            Total current assets                                               81,602          70,350
                                                                         ------------    ------------

Property and equipment, net                                                    55,709          49,342
Deferred income taxes                                                           8,592           7,663
Intangible assets, net                                                          2,178           1,710
Goodwill, net                                                                 135,335         130,474
Other assets                                                                      144             111
                                                                         ------------    ------------
                                                                         $    283,560    $    259,650
                                                                         ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                    $     25,320    $     28,656
     Accrued liabilities                                                       14,679          15,312
     Obligations under capital leases                                           4,785           2,552
     Current installments of long-term debt                                     7,545              43
     Income taxes payable                                                         864               -
                                                                         ------------    ------------
         Total current liabilities                                             53,193          46,563
                                                                         ------------    ------------

Deferred income taxes                                                          16,283          14,835
Other liabilities                                                               2,724           2,736
Obligation under capital leases                                                 1,306           1,355
Long-term debt, excluding current installments                                 20,661              59
                                                                         ------------    ------------
         Total liabilities                                                     94,167          65,548
                                                                         ------------    ------------

Shareholders' equity:
     Preferred stock, par value of $.001 per share
         Authorized 5,000,000 shares; none issued                                   -               -
     Common stock, par value of $.001 per share
         Authorized 20,000,000 shares: 12,307,128 shares issued and
         11,499,919 outstanding as of June 29, 2003 and 12,292,599
         shares issued and outstanding as of December 29, 2002                     12              12
     Additional paid-in capital                                               144,648         144,420
     Treasury stock, 807,209 shares                                            (8,012)              -
     Accumulated other comprehensive income (loss)                               (926)           (745)
     Retained earnings                                                         53,671          50,415
                                                                         ------------    ------------
         Total shareholders' equity                                           189,393         194,102
                                                                         ------------    ------------
                                                                         $    283,560    $    259,650
                                                                         ============    ============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       4

<PAGE>

                          INSURANCE AUTO AUCTIONS, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Cash Flows
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                           SIX MONTHS ENDED
                                                                                        ------------------------
                                                                                         JUNE 29,      JUNE 30,
                                                                                           2003          2002
                                                                                        ----------    ----------
                                                                                              (Unaudited)
<S>                                                                                     <C>           <C>
Cash flows from operating activities:
Net earnings                                                                            $    3,256    $    2,868
Adjustments to reconcile net earnings to net cash
   provided by operating activities:
     Depreciation and amortization                                                           4,870         4,275
     Loss (gain) on disposal of fixed assets                                                   (31)           34
     Loss (gain) on change in fair market value of derivative financial instrument            (307)          472
     Changes in assets and liabilities (excluding effects of acquired companies):
     (Increase) decrease in:
       Accounts receivable, net                                                              7,370        11,355
       Inventories                                                                             985         4,376
       Other current assets                                                                    917           863
       Other assets                                                                           (754)          438
     Increase (decrease) in:
       Accounts payable                                                                     (3,336)       (8,412)
       Accrued liabilities                                                                    (684)         (588)
       Income taxes, net                                                                     1,383         1,405
                                                                                        ----------    ----------
         Total adjustments                                                                  10,412        14,218
                                                                                        ----------    ----------
     Net cash provided by operating activities                                              13,669        17,086
                                                                                        ----------    ----------

Cash flows from investing activities:
   Capital expenditures                                                                     (6,498)       (6,601)
   Investments, net                                                                              -         2,643
   Proceeds from sale of investments                                                             -           175
   Proceeds from disposal of property and equipment                                             44             -
   Payments made in connection with acquisitions, net of cash acquired                      (7,863)            -
                                                                                        ----------    ----------
      Net cash used in investing activities                                                (14,317)       (3,783)
                                                                                        ----------    ----------

Cash flows from financing activities:
   Proceeds from issuance of common stock                                                      227           901
   Proceeds from term loan                                                                  30,000             -
   Purchase of treasury stock                                                               (8,012)            -
   Principal payments on long-term debt                                                     (1,896)      (20,022)
   Principal payments - capital leases                                                      (1,191)            -
                                                                                        ----------    ----------
Net cash provided (used) by financing activities                                            19,128       (19,121)
                                                                                        ----------    ----------

Net increase (decrease) in cash and cash equivalents                                        18,480        (5,818)

Cash and cash equivalents at beginning of period                                            10,027        24,467
                                                                                        ----------    ----------

Cash and cash equivalents at end of period                                              $   28,507    $   18,649
                                                                                        ==========    ==========

Supplemental disclosures of cash flow information:
  Cash paid during the period for:
     Interest                                                                           $      647    $    1,077
                                                                                        ==========    ==========
     Income taxes paid                                                                  $      797    $    1,735
                                                                                        ==========    ==========
     Income taxes refunded                                                              $    1,250    $    2,250
                                                                                        ==========    ==========
   Non-cash financing activities:
      Property and equipment additions resulting from capital leases                    $    3,375    $        -
                                                                                        ==========    ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       5

<PAGE>

                          INSURANCE AUTO AUCTIONS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       GENERAL

         The unaudited condensed consolidated financial statements of Insurance
         Auto Auctions, Inc. and its subsidiaries (collectively, the "Company")
         have been prepared on the same basis as the annual audited consolidated
         financial statements and, in the opinion of the Company, reflect all
         adjustments necessary for a fair presentation for each of the periods
         presented. The results of operations for interim periods are not
         necessarily indicative of results for full fiscal years.

         As contemplated by the Securities and Exchange Commission ("SEC") under
         Rule 10-01 of Regulation S-X, the accompanying consolidated financial
         statements and related notes have been condensed and do not contain
         certain information that is included in the Company's annual
         consolidated financial statements and notes thereto. For further
         information, refer to the consolidated financial statements and notes
         thereto included in the Company's annual report on Form 10-K for the
         year ended December 29, 2002.

         Fiscal year 2002 consisted of 52 weeks and ended December 29, 2002.
         Fiscal year 2003 will consist of 52 weeks and will end on December 28,
         2003.

         Certain reclassifications have been made to the prior year financial
         information to conform to the current year presentation.

2.       INCOME TAXES

         Income taxes were computed using the effective tax rates estimated to
         be applicable for the full fiscal years, which are subject to ongoing
         review and evaluation by the Company.

3.       GOODWILL AND INTANGIBLES

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill
         and Other Intangible Assets", which changes the accounting for goodwill
         and intangibles with an indefinite life from an amortization method to
         an impairment only approach. In accordance with SFAS No. 142, the
         Company completed the transitional impairment test of intangible assets
         during the first quarter of 2002. The results of this test did not
         indicate any impairment. The Company's annual impairment test is
         performed in the first quarter of each year. The current year annual
         impairment test did not indicate any impairment.

         Goodwill and other intangibles are recorded at cost, less accumulated
         amortization, and consist of the following at June 29, 2003 and
         December 29, 2002:

<TABLE>
<CAPTION>
                                                 June 29,       December 29,
                             Assigned Life         2003             2002
                             -------------       --------       ------------
                                          (dollars in millions)
<S>                          <C>                 <C>             <C>
Goodwill                     Indefinite          $  135.3        $   130.5
Covenants not to compete     5 to 15 years            2.2              1.7
                                                 --------        ---------
                                                 $  137.5        $   132.2
                                                 ========        =========
</TABLE>

                                       6
<PAGE>

         Amortization expense for the three months ended June 29, 2003 and June
         30, 2002 was $0.1 million in both periods. This amount is included
         within selling, general and administration expense on the Company's
         Condensed Consolidated Statements of Operations. Based upon existing
         intangibles, the projected annual amortization expense for 2003, 2004,
         2005 and 2006 is $0.4 million and $0.3 million for 2007.

4.       COMPREHENSIVE INCOME (LOSS)

         Comprehensive income (loss) consists of net earnings and the change in
         fair value of the Company's interest rate swap agreement as follows:

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED             SIX MONTHS ENDED
                                                ------------------------    ------------------------
                                                 JUNE 29,      JUNE 30,      JUNE 29,      JUNE 30,
                                                   2003          2002          2003          2002
                                                ----------    ----------    ----------    ----------
<S>                                             <C>           <C>           <C>           <C>
Net earnings                                    $    1,280    $    1,356    $    3,256    $    2,868
Other comprehensive loss
    Change in fair value of interest rate
      swap agreement                                   (25)         (191)         (291)         (191)
    Income tax benefit                                  10            82           110            82
                                                ----------    ----------    ----------    ----------
Comprehensive income                            $    1,265    $    1,247    $    3,075    $    2,759
                                                ==========    ==========    ==========    ==========
</TABLE>

         The change in fair value of the Company's interest rate swap agreement
         for the six-month period ended June 29, 2003 was due to a decline in
         interest rates.

5.       FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

         The Company, as a matter of policy, does not enter into derivative
         contracts for trading or speculative purposes. During the first quarter
         of 2002, the Company entered into an interest rate swap to mitigate its
         exposure to interest rate fluctuations and to effectively fix its
         borrowing rate at 5.6%. Under the interest rate swap agreement, the
         Company pays a fixed rate of interest of 5.6% and receives a
         LIBOR-based floating rate. At year-end December 29, 2002, the Company
         recorded a non-cash charge of $0.3 million related to the change in
         fair value for the portion of its interest rate swap agreement which
         did not qualify for hedge accounting. At December 29, 2002, the Company
         also recorded $0.7 million as a comprehensive loss related to the
         change in fair market value of the remaining portion of its interest
         rate swap agreement which qualified for hedge accounting.

         During the first quarter of 2003, the Company recorded a $0.3 million
         non-cash benefit related to the change in fair value of the interest
         rate swap agreement. The Company also recorded $0.2 million in the
         quarter for an accumulated comprehensive loss related to the change in
         fair market value of the remaining portion of its interest rate swap
         agreement, net of applicable tax effects. At March 30, 2003, the entire
         swap agreement qualified for hedge accounting.

         In the second quarter of 2003, the Company recorded an increase of less
         than $0.1 million to the accumulated comprehensive loss related to the
         change in fair market value of its interest rate swap agreement, net of
         applicable tax effects. At June 29, 2003, the entire swap agreement
         qualified for hedge accounting.

         On February 15, 2003, the Company borrowed all available funds related
         to its $30.0 million credit facility. The credit facility was a
         one-year revolver that converted on February 15, 2003, into a four-year
         term loan carrying a variable rate based upon LIBOR. The aggregate
         principal balance of the loan will be paid in sixteen consecutive equal
         quarterly installments commencing on March 31, 2003. As of March 30,
         2003, the Company was not in compliance with the fixed charge ratio
         provision of the term loan. The Company had obtained from the lenders a
         waiver regarding the noncompliance.

         On June 25, 2003, the Company entered into an amended and restated
         credit facility. This facility added a $20.0 million revolving line of
         credit, carrying a variable rate based on LIBOR, to the existing

                                       7
<PAGE>

         term loan. This amended and restated facility also modified all
         existing covenants except for the rent expense covenant. The amended
         credit facility also granted the Company latitude to purchase
         additional shares of the Company's outstanding common stock. At June
         29, 2003, the Company was in compliance with its credit facility
         covenants.

6.       TREASURY STOCK

         The Company records treasury stock purchases using the cost method of
         accounting. In March 2003, the Company repurchased 757,409 shares at an
         average price of $9.77 per share and a total cost of $7.4 million.
         During the second quarter, the Company repurchased an additional 49,800
         shares at an average price of $12.25 per share and a total cost of $0.6
         million. On a year-to-date basis, the Company has repurchased 807,209
         shares at an average price of $9.93 per share and a total cost of $8.0
         million.

7.       STOCK OPTIONS

         The Company accounts for its fixed plan stock options under the
         intrinsic value-based method of accounting prescribed by Accounting
         Principles Board Opinion No. 25, "Accounting for Stock Issued to
         Employees," and related interpretations. As such, compensation expense
         would be recorded on the date of grant and amortized over the period of
         service only if the current market value of the underlying stock
         exceeded the exercise price. No stock-based employee compensation cost
         is reflected in net earnings, as each option granted under these plans
         had an exercise price equal to the market value of the underlying
         common stock on the date of grant.

         The following table illustrates the effect on net earnings if the
         Company had applied the fair value recognition provision of Statement
         of Financial Accounting Standards (SFAS) No. 123, "Accounting for
         Stock-Based Compensation," to stock-based employee compensation,
         including a straight-line recognition of compensation costs over the
         related vesting periods for fixed awards:

<TABLE>
<CAPTION>
                                             Three Months Ended         Six Months Ended
                                           -----------------------   -----------------------
                                            June 29,     June 30,     June 29,     June 30,
                                              2003         2002         2003         2002
                                           ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>
Net earnings as reported                   $    1,280   $    1,356   $    3,256   $    2,868
Deduct: Total stock-based
    employee compensation expense
    determined under the fair
    value based method for all
    awards, net of related tax
    effects                                       433          304          864          625
                                           ----------   ----------   ----------   ----------
Pro forma net earnings                     $      847   $    1,052   $    2,392   $    2,243
                                           ==========   ==========   ==========   ==========

Earnings per share:
     Basic - as reported                   $      .11   $      .11   $      .28   $      .23
                                           ==========   ==========   ==========   ==========

     Basic - pro forma                     $      .07   $      .09   $      .20   $      .18
                                           ==========   ==========   ==========   ==========

     Diluted - as reported                 $      .11   $      .11   $      .27   $      .23
                                           ==========   ==========   ==========   ==========

     Diluted - pro forma                   $      .07   $      .08   $      .20   $      .18
                                           ==========   ==========   ==========   ==========
</TABLE>

                                       8
<PAGE>

8.       ACQUISITIONS

         The Company has acquired six vehicle auction facilities since the
         beginning of fiscal 2003. All of these acquisitions have been accounted
         for using the purchase method of accounting, and the results of
         operations of the acquired businesses are included in the Company's
         condensed consolidated financial statements from the dates of their
         acquisition.

         In January 2003, the Company acquired Salvage Management Inc., an
         operator of two auto salvage facilities in Buffalo and Rochester, New
         York. In April 2003, the Company acquired Wichita Insurance Pool, Inc.,
         located in Wichita, Kansas. In June 2003, the Company acquired
         Wilmington Salvage and Disposal Company, Inc. located in Wilmington,
         North Carolina and the Damaged Vehicle division of Manheim's Orlando
         Orange County Auto Auction, located in Orlando, Florida. All of these
         acquisitions leverage the Company's existing regional coverage. In
         April 2003, the Company also acquired Mountain States Salvage Pool,
         which is located in Ogden, Utah. This acquisition represents the
         penetration of a new market opportunity. The total cost of adding these
         six new facilities was less than $7.9 million. Of the total purchase
         amount of $7.9 million, 62% or $4.9 million is related to goodwill.

9.       NEW ACCOUNTING PRONOUNCEMENTS

         In April 2003, the Financial Accounting Standards Board ("FASB") issued
         SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and
         Hedging Activities." SFAS No. 149 amends and clarifies financial
         accounting and reporting for derivative instruments and for hedging
         activities under SFAS No. 133. SFAS 149 requires that contracts with
         comparable characteristics be accounted for similarly. This statement
         is effective for both contracts and hedging activities entered into or
         modified after June 30, 2003. The Company does not anticipate that the
         adoption of this standard will have a material impact on the Company's
         consolidated financial statements.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
         Financial Instruments with Characteristics of Both Liabilities and
         Equity. The statement required issuers to classify as liabilities (or
         assets in some circumstances) three classes of freestanding financial
         instruments that embody obligations of the issuer. Generally, the
         statement is effective for financial instruments entered into or
         modified after May 31, 2003 and is otherwise effective at the beginning
         of the first interim period beginning after June 15, 2003. The Company
         adopted the provisions of the statement on June 29, 2003. The Company
         did not have any instruments within the scope of the statement at June
         29, 2003.

                                       9
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The discussion in this section contains forward-looking information that is
subject to certain risks, trends and uncertainties that could cause actual
results to differ materially from those projected, expressed, or implied by such
forward-looking information. In some cases, you can identify forward looking
statements by our use of words such as "may, will, should, anticipates,
believes, expects, plans, future, intends, could, estimate, predict, projects,
targeting, potential or contingent," the negative of these terms or other
similar expressions. The Company's actual results could differ materially from
those discussed or implied herein. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed herein under
"Factors that May Affect Future Results" and in the Company's annual report on
Form 10-K for the fiscal year ended December 29, 2002. Among these risks are:
changes in the actual cash value of salvage; the quality and quantity of
inventory available from suppliers; the ability to pass through increased towing
costs; that vehicle processing time will improve; legislative or regulatory
acts; competition; the availability of suitable acquisition candidates and
greenfield opportunities; the ability to bring new facilities to expected
earnings targets; the dependence on key insurance company suppliers; the ability
of the Company and its outside consultants to successfully complete the
re-design of the Company's information systems, both in a timely manner and
according to costs and operational specifications; and the level of energy and
labor costs.

OVERVIEW

         Insurance Auto Auctions, Inc. offers insurance companies and other
vehicle suppliers cost-effective salvage processing solutions on either a
consignment fixed fee, consignment percentage of sale, or purchase agreement
basis. Under the consignment fixed fee method of sale, the Company receives a
fixed fee per vehicle for its services. Under the consignment percentage of sale
method, the Company receives a percentage of a vehicle's selling price as fee
for its services. There are, therefore, potentially greater profits to be
realized under the consignment percentage of sale method versus the consignment
fixed fee method because the higher the selling price of a vehicle, the greater
the return for both the Company and its salvage provider. This increased profit
potential encourages both the Company and the salvage provider to invest in
vehicle enhancements to maximize vehicle selling prices. Under the percentage of
sale and fixed fee consignment methods, the vehicles are not owned by the
Company and only the fees associated with processing the vehicle are recorded as
revenue. The proceeds from the sale of the vehicle itself are not included in
revenue. Under the purchase agreement sales method, the Company purchases
vehicles from a salvage provider according to pre-arranged contractual terms.
Because those vehicles are then owned by the Company, the total proceeds from
the sale of the vehicle are recorded as revenue.

         Since its initial public offering in 1991, the Company has grown
primarily through a series of acquisitions and opening of new sites to now
include 74 sites. During the first quarter of 2003, the Company acquired
facilities in Rochester and Buffalo, New York, and established new facilities in
Dothan, Alabama and Little Rock, Arkansas. In second quarter 2003, the Company
acquired facilities in Wichita, Kansas, Ogden, Utah, Wilmington, North Carolina,
and Orlando, Florida.

RESULTS OF OPERATIONS

Three Months Ended June 29, 2003 Compared to the Three Months Ended June 30,
2002

         Revenues were $53.3 million for the three months ended June 29, 2003,
down from $59.8 million for the same three month period in 2002. The decline in
revenues is primarily due to the Company's continued shift away from vehicles
sold under the purchase agreement method. Under the purchase agreement method,
the entire purchase price of the vehicle is recorded as revenue compared to only
recording the fees collected on the sale of a vehicle under the lower risk
consignment fee based arrangements. Vehicles sold under the purchase agreement
method accounted for 6% of the total vehicles sold in the second quarter of
2003, versus 9% for the same quarter last year. Fee income in the second quarter
increased to $43.1 million versus $42.7 million in the second quarter of last
year.

                                       10
<PAGE>

         Net revenues, defined as gross revenues less vehicle cost, decreased to
$43.9 million for the three months ended June 29, 2003 from $44.9 million for
the same three month period last year. The Company utilizes this revenue
measurement to evaluate its performance by computing all revenues on a
consignment equivalent basis.

         Cost of sales decreased $5.5 million to $42.3 million for the three
months ended June 30, 2003, versus $47.8 million for the same period last year.
Vehicle cost of $9.4 million is $5.4 million less than last year's amount of
$14.8 million. This decrease is primarily related to the Company's shift away
from vehicles sold under the purchase agreement method. Branch cost of $32.8
million decreased $0.2 million from $33.0 million for the same period last year.
Fixed costs were up substantially due to branches added since the second quarter
of last year. Despite these higher fixed costs, total branch costs were lower in
the second quarter of 2003 due to the efficiencies achieved as a result of the
business process improvements implemented last year.

         Gross profit decreased 7% to $11.1 million for the three months ended
June 29, 2003, from $11.9 million for the comparable period in 2002.

         Selling, general and administration expense of $7.5 million for the
three months ended June 29, 2003 increased $0.6 million, or 9%, from the $6.9
million recorded in the same quarter last year. This increase was primarily due
to activities associated with the new system implementation and branch expansion
during the quarter along with depreciation expense related to the new computer
system. Amortization of intangible assets is now included within this category
of expense and amounted to $0.1 million in the quarter for both 2003 and 2002.

         Business transformation costs currently include direct costs to convert
the existing databases and dedicated training resources. Direct costs related to
the system conversion were $0.9 million in this quarter, which was lower than
the $2.2 million recorded in the same quarter last year but higher than
expected. In 2002, business transformation costs included the information
technology system redesign project, the business process re-engineering project,
severance costs and accelerated depreciation associated with the Company's
existing computer infrastructure. The Company began recording business
transformation costs during the second quarter of 2001.

         Interest expense of $0.5 million for the three months ended June 29,
2003 was consistent with the comparable period in 2002. Included in interest
expense for the three months ended June 30, 2002 was a non-cash charge of $0.5
million related to the change in fair value of the interest rate swap agreement.
Other income of less than $0.1 million declined from last years' amount of $0.1
million.

         The Company's effective income tax rate was 41.2% and 43.0% in 2003 and
2002, respectively.

Six Months Ended June 29, 2003 Compared to the Six Months Ended June 30, 2002

         Revenues were $109.4 million for the six months ended June 29, 2003,
down from $129.0 million for the same six month period in 2002. The decline in
revenues is primarily due to the Company's continued shift away from vehicles
sold under the purchase agreement method. Vehicles sold under the purchase
agreement method accounted for 7% of the total vehicles sold in the first six
months of 2003, versus 11% for the same time frame last year. Fee income
increased to $85.9 million versus $84.2 million for the same six month period in
2002.

         Net revenues, defined as gross revenues less vehicle cost, increased to
$88.2 million for the six months ended June 29, 2003 from $88.1 million for the
same six month period last year. The Company utilizes this revenue measurement
to evaluate its performance by computing all revenues on a consignment
equivalent basis.

         Cost of sales decreased $18.1 million to $87.0 million for the six
months ended June 29, 2003, versus $105.1 million for the same period last year.
Vehicle cost of $21.2 million is $19.7 million less than last year's amount of
$40.9 million. This decrease is primarily related to the Company's shift away
from

                                       11
<PAGE>

vehicles sold under the purchase agreement method. Branch cost of $65.8 million
increased $1.6 million from $64.2 million for the same period last year. This
increase is primarily the result of additional operating costs related to new
branch facilities.

         Gross profit decreased 6% to $22.4 million for the six months ended
June 29, 2003, from $23.9 million for the comparable period in 2002.

         Selling, general and administration expense of $14.7 million increased
4% from last year's amount of $14.1 million. This increase is primarily due to
indirect activities related to the new system implementation and branch
expansion. Amortization of intangible assets is now included within this
category of expense and amounted to $0.2 million in 2003 and $0.1 million in
2002.

         Business transformation costs for the six months ended June 29, 2003
were $1.7 million versus $4.2 million in the same period last year. Business
transformation costs currently include direct costs to convert the existing
databases and dedicated training resources. In 2002, business transformation
costs included the information technology system redesign project, the business
process re-engineering project, severance costs and accelerated depreciation
associated with the Company's existing computer infrastructure. The Company
began recording business transformation costs during the second quarter of 2001.

         Interest expense of $0.6 million for the six months ended June 29,
2003, decreased $0.1 million from $0.7 million for the comparable period in
2002. Included in interest expense for the six months ended June 30, 2002 was a
non-cash charge of $0.5 million related to the change in fair value of the
interest rate swap agreement. Other income was unchanged from the prior year's
amount.

         The Company's effective income tax rate was 41.2% and 43.0% in 2003 and
2002, respectively.

FINANCIAL CONDITION AND LIQUIDITY

         At June 29, 2003, the Company had current assets of $81.6 million,
which includes $28.5 million of cash and cash equivalents. Current liabilities
were $53.2 million. The Company had working capital of $28.4 million at June 29,
2003, a $4.6 million increase from December 29, 2002.

         At June 29, 2003, the Company's long-term debt, including current
installments, consisted of $0.1 million in notes payable, bearing interest at a
rate of 8.0%, and $28.1 million borrowed under its credit facility. The credit
facility was a one-year revolver that converted on February 15, 2003, into a
four-year term loan carrying a variable rate based upon LIBOR. (See Note 5 of
Notes to Condensed Consolidated Financial Statements - Financial Instruments and
Hedging Activities.) Other long-term liabilities include a post-retirement
benefits liability that relates to the acquisition in 1994 of Underwriters
Salvage Company. The amount recorded at June 29, 2003 for the post-retirement
benefits liability is approximately $2.7 million.

         Capital expenditures were $6.5 million for the six months ended June
29, 2003. These capital expenditures include capitalization of certain
development costs related to the Company's new information technology system
along with various branch improvements, including upgrades to existing branches
and the addition of capacity in key markets. In addition to the cash capital
expenditures, property and equipment additions of $3.4 million resulted from
capital lease transactions entered into during the year. At June 29, 2003, the
Company's total future obligation under all capital leases was $6.1 million.

         The Company has acquired six vehicle auction facilities since the
beginning of fiscal 2003. All of these acquisitions have been accounted for
using the purchase method of accounting, and the results of operations of the
acquired businesses are included in the Company's condensed consolidated
financial statements from their date of acquisition. In January 2003, the
Company acquired Salvage Management Inc., an operator of two auto salvage
facilities in Buffalo and Rochester, New York. In April 2003, the Company
acquired Wichita Insurance Pool, Inc., located in Wichita, Kansas. In June 2003,
the Company acquired Wilmington Salvage and Disposal Company, Inc. located in
Wilmington, North Carolina and the Damaged Vehicle division of Manheim's Orlando
Orange County Auto Auction, located in Orlando, Florida. All of these
acquisitions leverage the Company's existing regional coverage. In April 2003,
the Company also

                                       12
<PAGE>

acquired Mountain States Salvage Pool, which is located in Ogden, Utah. This
acquisition represents penetration into a new market. The total cost of adding
these six new facilities was less than $7.9 million.

         The Company's Board of Directors authorized the purchase of 1,500,000
shares of its common stock in September 2000 and an additional 750,000 shares in
April 2003, for a combined authorization of 2,250,000 shares. Purchases may be
made from time to time in the open market or in privately negotiated
transactions, subject to the requirements of applicable laws, and will be
financed with existing cash and cash equivalents, marketable securities, and
cash from operations. As of June 29, 2003, the Company had purchased 807,209
shares pursuant to this authorization at an average price of $9.93 per share.

         The Company believes that existing cash and cash equivalents, as well
as cash generated from operations will be sufficient to fund capital
expenditures and provide adequate working capital for operations for the next
twelve months. Part of the Company's plan is to pursue continued growth,
possibly through new facility start-ups, acquisitions, and the development of
new claims processing services. At some time in the future, the Company may
require additional financing. There can be no assurance that additional
financing, if required, will be available on favorable terms.

FACTORS THAT MAY AFFECT FUTURE RESULTS

         The Company operates in a changing environment that involves a number
of risks, some of which are beyond the Company's control. The following
discussion highlights some of these risks.

         Quarterly Fluctuations. The Company's operating results have in the
past and may in the future fluctuate significantly depending on a number of
factors, some of which are more significant for sales under the purchase
agreement method. These factors include: fluctuations in Actual Cash Value
("ACV" - the estimated pre-accident fair value of the vehicle) of salvage
vehicles, changes in the market value of salvage vehicles, delays or changes in
state title processing, general weather conditions, changes in regulations
governing the processing of salvage vehicles, the availability and quality of
salvage vehicles and buyer attendance at salvage auctions. The Company is also
dependent upon receiving a sufficient number of total-loss vehicles as well as
recovered theft vehicles to sustain its profit margins. Factors that can affect
the number of vehicles received include: reduction of policy writing by
insurance providers, which would affect the number of claims over a period of
time, and changes in direct repair procedures that would reduce the number of
newer, less damaged total-loss vehicles, which tend to have the higher salvage
values. The decreases in the quality and quantity of inventory, and in
particular the availability of newer and less-damaged vehicles, are further
aggravated under the purchase agreement method of sale and can have a material
adverse effect on the operating results and financial condition of the Company.
Additionally, in the last few years there has been a declining trend in theft
occurrences. As a result, the Company believes that period-to-period comparisons
of its results of operations are not necessarily meaningful and should not be
relied upon as any indication of future performance. Furthermore, revenues for
any future quarter are not predictable with any significant degree of accuracy,
while the Company's expense levels are relatively fixed. If revenue levels are
below expectations, operating results are likely to be adversely affected. Due
to all of the foregoing factors, it is likely that in some future quarters the
Company's operating results will be below the expectations of public market
analysts and investors. Any failure to meet expectations of securities analysts
or the market in general could adversely affect the market price of the
Company's common stock.

         Competition. The Company faces intense competition for the supply of
salvage vehicles as well as competition from processors of vehicles from other
regional salvage pools. It is possible that the Company may encounter further
competition from existing competitors and new market entrants that are
significantly larger and have greater financial and marketing resources. Other
potential competitors could include used car auction companies, providers of
claims software to insurance companies, certain salvage buyer groups and
insurance companies, some of which presently supply auto salvage to the Company.
While most insurance companies have abandoned or reduced efforts to sell salvage
without the use of service providers such as the Company, they may in the future
decide to dispose of their salvage directly to end users. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors or that competitive pressures faced by the Company will
not have a material adverse effect on its operating results and financial
condition.

                                       13
<PAGE>

         Dependence on Key Insurance Company Suppliers. Historically, a limited
number of insurance companies has accounted for a substantial portion of the
Company's revenues. For example, in 2002, vehicles supplied by the Company's
three largest suppliers accounted for approximately 39% of the Company's total
unit sales. The largest suppliers, State Farm Insurance, Farmers Insurance, and
Allstate, each accounted for approximately 16%, 14%, and 9%, respectively, of
the Company's unit sales. A loss or reduction in the number of vehicles from any
of these suppliers, or adverse changes in the agreements that such suppliers
have with the Company, could have a material adverse effect on the Company's
operating results and financial condition.

         Purchase Agreement Method. Under the purchase agreement method of sale,
the Company is required to purchase, and the insurance company and other
non-insurance company suppliers are required to sell to the Company, virtually
all total-loss and recovered theft vehicles generated by the supplier in a
designated geographic area. The agreements are customized to each supplier's
needs, but typically require the Company to pay a specified percentage of a
vehicle's Actual Cash Value (ACV), depending on the vehicle's age and certain
other conditions, including whether the vehicle is a total-loss or a recovered
theft vehicle. Because the Company's purchase price is fixed by contract, higher
ACVs and lower market or auction prices for salvage vehicles have an impact on
the profitability of the sale of vehicles under the purchase agreement method.
Beginning late in the second quarter of 2000 and continuing through 2002,
purchase agreement profitability was impaired by a combination of rising ACVs
and flat to lower sale prices at auctions in certain areas of the country.
Further increases in ACVs or declines in the market or auction prices for
salvage vehicles could have a material adverse effect on the Company's operating
results and financial condition. To mitigate this risk, the Company began shift
away from the sale of vehicles under the purchase agreement method. In 2002 and
2001, respectively, approximately 10% and 19% of the units processed by the
Company were processed through the purchase agreement method of sale. Vehicles
sold under the purchase agreement method accounted for 8% of the total vehicles
sold in the first quarter of 2003, versus 13% for the same quarter last year and
8% for the fourth quarter of 2002. The Company expects the purchase agreement
method to represent a decreasing percentage of units sold in future years and
ultimately to represent less than 4 % of total units sold.

         Enterprise-Wide System Redesign Project. The Company retained the
services of SEI Information Technology to develop a new enterprise-wide
application to manage the salvage and auction process. The new Web-based system
will support and streamline vehicle registration and tracking, financial
reporting, transaction settlement, vehicle title transfer, and
branch/headquarters communications. It will speed all aspects of the Company's
operations, support growth and expansion plans, provide improved reliability and
maintainability, and ultimately, deliver increased profits. As a result of its
investment in developing and implementing key standardized business processes
throughout the Company and the Enterprise-Wide System Redesign Project, the
Company expects to reduce its annual pre-tax operating costs by a minimum of $10
million, and potentially as much as $15 million from the two projects combined.
Completed development and testing of the enterprise-wide application began in
the third quarter of 2001. The Company began rolling out the new system to its
branches during the third quarter of 2002. As of July 31, 2003, the Company had
converted most of the original databases to the new system. The Company has
encountered some unanticipated issues in the implementation phase. The Company
expects to complete the roll-out in 2003. However, there remains inherent risks
associated with the application and implementation of the new system that could
continue to adversely impact the Company's expected results with respect to
timing, costs and cost savings.

         Governmental Regulation. The Company's operations are subject to
regulation, supervision and licensing under various federal, state and local
statutes, ordinances and regulations. The acquisition and sale of totaled and
recovered theft vehicles is regulated by state motor vehicle departments in each
of the locations in which the Company operates. Changes in law or governmental
regulations or interpretations of existing law or regulations can result in
increased costs, reduced salvage vehicle prices and decreased profitability for
the Company. In addition to the regulation of sales and acquisitions of
vehicles, the Company is also subject to various local zoning requirements with
regard to the location of its auction and storage facilities. These zoning
requirements vary from location to location. Failure to comply with present or
future regulations or changes in existing regulations could have a material
adverse effect on the Company's operating results and financial condition.

                                       14
<PAGE>

         Provision of Services as a National or Regional Supplier. The provision
of services to insurance company suppliers on a national or regional basis
requires that the Company expend resources and dedicate management to a small
number of individual accounts, resulting in a significant amount of fixed costs.
The development of a referral based national network service, in particular, has
required the devotion of financial resources without immediate reimbursement of
such expenses by the insurance company suppliers.

         Expansion and Integration of Facilities. The Company seeks to increase
sales and profitability through acquisition of other salvage auction facilities,
new site expansion and the increase of salvage vehicle volume at existing
facilities. There can be no assurance that the Company will continue to acquire
new facilities or add additional facilities on terms economically favorable to
the Company or that the Company will be able to increase revenues at newly
acquired facilities above levels realized prior to acquisition. The Company's
ability to achieve these objectives is dependent on, among other things, the
integration of new facilities, and their information systems, into its existing
operations, the identification and lease of suitable premises, and the
availability of capital. There can be no assurance that this integration will
occur, that suitable premises will be identified or that additional capital will
be available to fund expansion and integration of the Company's business. Any
delays or obstacles in this integration process could have a material adverse
effect on the Company's operating results and financial condition. Furthermore,
the Company has limited sources of additional capital available for
acquisitions, expansions and start-ups. The Company's ability to integrate and
expand its facilities will depend on its ability to identify and obtain
additional sources of capital to finance such integration and expansion. In the
future, the Company will be required to continue to improve its financial and
management controls, reporting systems and procedures on a timely basis and
expand, train and manage its employee work force. The failure to improve these
systems on a timely basis and to successfully expand and train the Company's
work force could have a material adverse effect on the Company's operating
results and financial condition.

         Volatility of Stock Price. The market price of the Company's common
stock has been and could continue to be subject to significant fluctuations in
response to various factors and events, including variations in the Company's
operating results, the timing and size of acquisitions and facility openings,
the loss of vehicle suppliers or buyers, the announcement of new vehicle supply
agreements by the Company or its competitors, changes in regulations governing
the Company's operations or its vehicle suppliers, environmental problems or
litigation. Any failure to meet expectations of securities analysts or the
market in general could adversely affect the market price of our common stock.

         Environmental Regulation. The Company's operations are subject to
federal, state and local laws and regulations regarding the protection of the
environment. In the salvage vehicle auction industry, large numbers of wrecked
vehicles are stored at auction facilities for short periods of time. Minor
spills of gasoline, motor oils and other fluids may occur from time to time at
the Company's facilities and may result in soil, surface water or groundwater
contamination. Petroleum products and other hazardous materials are contained in
aboveground or underground storage tanks located at certain of the Company's
facilities. Waste materials such as waste solvents or used oils are generated at
some of the Company's facilities and are disposed of as non-hazardous or
hazardous wastes. The Company believes that it is in compliance in all material
respects with applicable environmental regulations and does not anticipate any
material capital expenditure for environmental compliance or remediation.
Environmental laws and regulations, however, could become more stringent over
time and there can be no assurance that the Company or its operations will not
be subject to significant compliance costs in the future. To date, the Company
has not incurred expenditures for preventive or remedial action with respect to
contamination or the use of hazardous materials that have had a material adverse
effect on the Company's operating results or financial condition. The
contamination that could occur at the Company's facilities and the potential
contamination by previous users of certain acquired facilities create the risk,
however, that the Company could incur substantial expenditures for preventive or
remedial action, as well as potential liability arising as a consequence of
hazardous material contamination, which could have a material adverse effect on
the Company's operating results and financial condition.

                                       15
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         On February 15, 2003, the Company borrowed available funds related to
its $30.0 million credit facility. The credit facility was a one-year revolver
that converted on February 15, 2003, into a four-year term loan carrying a
variable rate based upon LIBOR. The aggregate principal balance of the loan will
be paid in sixteen consecutive equal quarterly installments commencing on March
31, 2003.

         The Company is exposed to interest rate fluctuations on its floating
rate credit facility, under which the Company has outstanding a $28.1 million
term loan. In 2002, the Company entered into an interest rate swap to mitigate
its exposure to interest rate fluctuations, and does not, as a matter of policy,
enter into hedging contracts for trading or speculative purposes. At June 29,
2003, the interest rate swap agreement has a notional amount of $28.1 million
under which the Company pays a fixed rate of interest of 5.6% and receives a
LIBOR-based floating rate. The Company recorded a non-cash benefit of $0.3
million in the first quarter related to the change in fair value for a portion
of its interest rate swap agreement. For the six month period ended June 29,
2003, the Company has recorded $0.2 million of an accumulated comprehensive
loss, net of taxes, related to the change in fair value of the remaining portion
of its interest rate swap agreement. At June 29, 2003, the entire swap agreement
qualified for hedge accounting.

ITEM 4. CONTROLS AND PROCEDURES

         Based on an evaluation of the Company's disclosure controls and
         procedures conducted as of the end of the period covered by this
         report, the Company's Chief Executive Officer and its Chief Financial
         Officer have concluded that the Company's disclosure controls and
         procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated
         under the Securities Exchange Act of 1934, are effective. The Company
         is in the process of rolling out a new enterprise-wide application to
         manage the salvage and auction process. The new system contains many
         changes and enhancements to the existing control procedures. The
         Company expects to complete the rollout of the new system in 2003.

PART II. OTHER INFORMATION.

ITEM 1.  LEGAL PROCEEDINGS. Inapplicable

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. Inapplicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Inapplicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                  At the Annual Meeting of Shareholders of the Company held June
         18, 2003, the shareholders (i) elected seven directors to serve on the
         Company's Board of Directors, (ii) approved the adoption of a new 2003
         Stock Incentive Plan replacing the Company's Amended and Restated 1991
         Stock Option Plan, and (iii) ratified the Company's appointment of KPMG
         LLP to serve as the Company's independent auditors for the fiscal year
         ending December 28, 2003. Shareholders holding 10,793,660 shares of
         Common Stock, representing 93.46% of the total number of shares
         outstanding and entitled to vote at the meeting, were present in person
         or by proxy at the meeting.

                                       16
<PAGE>

 The vote for nominated directors was as follows:

<TABLE>
<CAPTION>
Director                  Votes For     Votes Withheld
--------                  ---------     --------------
<S>                       <C>           <C>
Thomas C. O'Brien         10,470,840       322,820
Maurice A. Cocca          10,454,842       338,818
Peter H. Kamin            10,464,090       329,570
Philip B. Livingston      10,463,390       330,270
Melvin R. Martin          10,457,365       336,295
Jeffrey W. Ubben          10,459,642       334,018
John K. Wilcox            10,457,590       336,070
</TABLE>

                  The vote to approve the adoption of a new 2003 Stock Incentive
         Plan to replace the Company's Amended and Restated 1991 Stock Option
         Plan was as follows: For: 7,480,461; Against: 1,270,179; Abstain: 9,587
         and not voted: 2,033,433.

                  The vote for ratifying the appointment of KPMG LLP as the
         Company's independent auditors for the fiscal year ending December 28,
         2003 was as follows: For: 10,563,743; Against: 229,451; and Abstain:
         466.

ITEM 5. OTHER INFORMATION. Inapplicable

ITEM 6. EXHIBITS AND REPORT ON FORM 8-K.

         (a)      EXHIBITS.

                  10.1     Amended and Restated Credit Agreement between the
                           Company and LaSalle National Bank dated as of June
                           25, 2003.

                  31.1*    Certification by the CEO pursuant to Section 302 of
                           the Sarbanes-Oxley Act of 2002.

                  31.2*    Certification by the CFO pursuant to Section 302 of
                           the Sarbanes-Oxley Act of 2002.

                  32**     Certification by the CEO and CFO pursuant to Section
                           906 of the Sarbanes-Oxley Act of 2002.

                  *        Filed herewith

                  **       Furnished herewith.

         (b)      REPORTS ON FORM 8-K. The Company furnished to the SEC a
                  current report on Form 8-K on April 29, 2003 which included a
                  press release which contained a report on first quarter
                  results of operations; an update on the Company's growth and
                  expansion strategy; and the decision of the Company's current
                  Chairman of the Board, Joseph F. Mazzella to not stand for
                  re-election to the Company's Board and the appointment of
                  director Peter H. Kamin to the Chairman's post upon
                  re-election at the Company's 2003 Annual Meeting.

                  The Company furnished to the SEC a current report on Form 8-K
                  on July 28, 2003 to report preliminary second quarter results
                  dated July 15, 2003 and second quarter 2003 results dated July
                  25, 2003.

                                       17
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                  INSURANCE AUTO AUCTIONS, INC.

Date: August 12, 2003             By:    /s/ Scott P. Pettit
                                     ----------------------------------------
                                  Name:  Scott P. Pettit
                                  Title: Senior Vice President and Chief
                                         Financial Officer (Duly Authorized
                                         Officer and Principal Financial
                                         Officer)

                                       18
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT NO.

10.1     Amended and Restated Credit Agreement between the Company and LaSalle
         National Bank dated as of June 25, 2003.

31.1*    Certification by the CEO pursuant to Section 302 of the Sarbanes-Oxley
         Act of 2002.

31.2*    Certification by the CFO pursuant to Section 302 of the Sarbanes-Oxley
         Act of 2002.

32**     Certification by the CEO and CFO pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002.

*        Filed herewith

**       Furnished herewith.