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.

CARCO inspections are required for insureds who are purchasing or adding property damage coverage to their vehicles in these five states.

There are some circumstances where an insured does not have to have the vehicle inspected.

  • When purchasing/leasing a new vehicle less than 30 days old with documentation
  • When a car is over a certain age and has been consistently registered/ insured for property
  • Damage coverage with the same insurer
  • When a car is over a certain age or previously insured with no break in coverage and
  • Documentation has been forwarded to CARCO and the new insurer.

Exceptions vary a bit from state to state so check with the applicable state law and the local DMV.

The CARCO inspection is a physical inspection at a CARCO location that:

  • Documents the existence of the vehicle (VIN number)
  • Mileage (Odometer reading)
  • Physical condition (including photographs of the vehicle, except in Florida)
  • Existing option and accessories

The CARCO inspector fills out the state-mandated inspection form with the required information, processes the report and photos to be forwarded to the insurance company, and gives the insured a copy of the official report to retain in their records or forward to their agent.

Depending on the state, insureds have between 5 to 35 days to schedule and complete the required inspection when physical damage coverage is added. This applies to both new policies and when adding a vehicle that needs an inspection to an existing policy.

In addition, CARCO has a mobile app that allows the insured to take the photos themselves and upload them to CARCO's inspection portal for immediate processing. However, not all states accept online processing.