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There are many types of insurance fraud, from padding claims to falsifying documents to staging accidents. One popular fraud is buying insurance on a damaged vehicle and claiming it is in good condition, only to later file a claim for the damage to have the vehicle repaired, even though the damage occurred before the policy inception date. In light of that, some states have instituted what is known as “CARCO” inspection laws. The laws are named for the company that provides the mandatory pre-insurance automobile inspections as a means to help fight insurance fraud and develop accurate premiums. These states are New York, New Jersey, Florida, Massachusetts and Rhode Island. Consumers in those states must submit to a CARCO inspection when purchasing physical damage coverage on their vehicles. Those who fail to have the inspection done will find their policy’s physical damage coverage (collision and comprehensive) suspended after the grace period for complying with this regulation ends.

In New York between 2014 and 2018, CARCO Group’s inspections uncovered around $1.8 billion in pre-existing auto damage. This saved insurers about $128 million in false claims. CARCO has stated that for every dollar invested in these pre-insurance inspections $34 in false claims payouts have been avoided.

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