How Not To Fake Your Own Death

John and Anne Darwin are facing criminal charges following his return from the dead. This has inspired one Fool to write about a true tale of insurance fraud.

The front pages of recent newspapers have been dominated by the miraculous return of John Darwin following his disappearance five years ago.

Mr Darwin was thought to have died in a canoeing accident in March 2002. However, he and his wife now face allegations of fraud for obtaining life insurance payouts of £137,000 and £25,000 in 2003. At present, both Mr and Mrs Darwin have been remanded in custody by Hartlepool magistrates, to await trial at the Crown Court.

Having worked for several insurance firms over a fifteen-year period, I've come across similar tales. In my experience, the main reason why people try to fake their own deaths is to obtain a bogus payout from a life insurance policy. Usually, claimants aim to use this lump sum to pay off heavy debts, leave their families in the clear, and start new lives.

Generally speaking, insurance fraud tends to decrease in periods of economic prosperity and increase during slowdowns and recessions. So, let me take you back to the recession of the early Nineties, when I handled a bogus claim from a struggling businessman. At the time, I worked in the legal department of an insurance firm, dealing with fraud, litigation and claims with potentially large payouts. In order to protect the innocent -- and the guilty -- I will be deliberately vague. However, all of the following facts are true and document the events which surrounded this fraud case.

Mr Smith (not his real name) owned a manufacturing business and a family home in England. However, his company had taken a beating in the downturn, and he was worried that his growing debts would cause him to lose both his business and his home. At this time, he insured his life for large sums with several leading insurance companies.

Later that year, Mr Smith returned to the land of his birth in order to visit his extended family. During this stay, he allegedly got into difficulty in a fast-flowing river and drowned. By chance, he had left his clothes and a letter addressed to his wife in England on the river bank, thus making it easy for the authorities to identify him. Mr Smith's religion required that his body be cremated within 24 hours of his death. Thus, it was claimed that his body was burnt immediately after death.

Following these events, my firm received a demand for a six-figure payout from Mr Smith's life insurance policy. In those days, there was no central anti-fraud database to match up suspicious claims -- although such systems are in use today; National Hunter is the most widely used. However, we would discuss potentially fraudulent claims and large liabilities at a monthly meeting with our counterparts at other insurers.

We quickly realised that Mr Smith's family stood to inherit a sum in the region of £500,000 if his death was genuine. Thus, several insurers pooled their resources and hired a private investigator to travel abroad in order to discover the circumstances surrounding Mr Smith's death. Our private eye soon established that there were no eye-witnesses to the death. What's more, the death certificate had been signed by a relative of Mrs Smith, which raised our suspicions yet further.

After several months of chasing down leads, our very own Sherlock Holmes finally found the elusive Mr Smith, hundreds of miles from the place where he claimed to have died. To our surprise, he was indeed dead! In anticipation of a huge financial windfall, Mr Smith had embarked on a massive drinking binge lasting many months. This had destroyed his health, and he died in a home for chronic alcoholics.

So, Mr Smith was indeed dead and we now owed his widow a great, big cheque, right? Wrong! Insurance law is very clear: if a false claim "A" is followed by a genuine claim "B" under the same policy, both claims can be rejected. This is because the fraudster has broken the contract of `utmost good faith' agreed by both parties.

Thus, by faking his own death, Mr Smith voided his policies and left himself uninsured. This explains why all the firms concerned rejected his claims outright. As a consequence of his actions, Mr Smith's family lost their business, their home, and their father. What a truly tragic and needless outcome for all concerned.

In summary, think, think and think again before you decide to commit fraud in order to obtain a payout from life insurance. If your (alleged) death is anything other than clear-cut, then you can expect a thorough enquiry by experienced fraud investigators. These experts will probe all aspects of your financial life, and will be particularly suspicious if you have run up large debts prior to making a life insurance claim.

Finally, if your debts are getting you down, please don't go to crazy lengths to repay them by faking your own death. You could end up losing your home, your family and your liberty if convicted of fraud. Instead, take the first step towards a debt-free future by visiting our Get Out of Debt centre today!

PS: The dumbest fraudster I ever came across submitted a life insurance claim which he'd signed himself. Oops!

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