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Investigators and a coalition charged with fighting fraud say the life insurance industry is waging a quiet but ongoing battle to prevent dishonest policyholders from making insurance claims by faking their own deaths.

Do people fake their own death to get life insurance money? It’s not an easy feat, but this form of insurance fraud does happen.

“Life insurance companies are on high alert for fake death,” says James Quiggle, retired spokesperson for the Coalition Against Insurance Fraud (CAIF), an alliance of consumer groups, insurance companies and government agencies. “It happens often enough that these crimes are a permanent part of their investigative portfolios. They are well-mobilized. They have the resources to try to track down the scammers.”

The effort to screen out potential fraud begins soon after a person seeks a life insurance quote. Anyone who acknowledges a criminal background may be examined closely, depending on the size of the policy. However, in most cases, no deep background checks occur until something happens that makes a life insurance claim seem suspicious.

Key Takeaways

  • Faking a death to collect on life insurance is insurance fraud and involves serious penalties.
  • There are no clear statistics on how often people successfully fake a death for life insurance money.
  • Insurance companies use proprietary methods to catch fake death claims.

How much do fake death claims cost?

faking death for life insurance moneyThere is no data to pin down exactly how much fake-death scams cost insurance companies in the U.S. each year, says Quiggle. Steven Rambam, an investigator for three decades and director of Pallorium Inc., an investigative agency with offices in New York and Texas, says individual life insurance companies in the U.S. could face could huge losses if they drop their guard against fraudsters.

“The amount of loss to the company, if they are not vigilant about pursuing fraudsters, can be massive,” says Rambam. “There is one carrier–approximately eight years ago their profit from the life insurance side was $840 million and we had investigated claims for them … that saved them $36 million. Their profit would have gone down almost 4%.”

Life insurers often decline to discuss life insurance fraud and how they deal with it. It’s proprietary information.

Are faked death claims common?

Because there is no hard data on how many people fake their own deaths to cash in on life insurance, opinions vary about how widespread the crime is. Jack Dewald, senior advisor at Agency Services, Inc. and the former chair of the Life and Health Insurance Foundation for Education (LIFE) governing board–says most “bad elements” are weeded out in the policy application process.

Dewald, whose career extends back 30 years, says his insurance brokerage has never encountered a faked death.

It’s much harder to fake a death in the U.S. than in less developed countries, where death certificates can be purchased easily by bribing medical examiners and other local officials.

Because prosecutions can be difficult – even on U.S. soil — the main focus of many insurers is avoiding payouts for false claims.

Fake death claims on high-value policies

One of the main goals in faked deaths “is to scam a life policy so you can have that $1 million windfall,” says Quiggle. “That kind of money can set you up nicely for life in a…country where expenses are low,” he says. In parts of the Middle East, Mexico, Central America and South America, “crooks go to creative and elaborate extremes to create the appearance of a death. They may hire villagers as mourners and stage a complete funeral,” Quiggle says.

Rambam says he has noticed some recent insurance fraud trends in general.

“There is less and less fraud coming out of Europe,” he says. “There is more out of Africa and Asia. You have traditional fraud hotspots which are Russia and China and India. I have seen fraud in Vietnam. I have seen fraud in Central and South America. There is a regular call for investigation in Mexico.”

While some crooks frustrate investigators, most people who commit life insurance fraud get caught, insists investigator David Cohen of Investigative Resources of Texas. “I have been doing insurance fraud for 20 years. They think they are smart: ‘I love this place I went to in Mexico and I will just fake my death, take the insurance money, and go there.’ It happens more frequently than you can imagine. Out of five, I will catch three.”

Most large insurance companies use their own investigative teams for domestic fraud cases, says Rambam. “They don’t need to sign it out unless it is a real hardcore case. Most of the assignments we get are outside the U.S.”

A typical criminal is a native of a foreign nation who has lived in America, bought a life insurance policy here, and returned home for a visit. During that visit, a death is staged. Cohen says he focuses on “any kind of activity” that demonstrates that the “deceased” still is alive.

“I will dig into your phone [calls],” he says. “I will dig into social media. I will also look at past passport activity. If someone is an international traveler and they have vacationed one place frequently over a number of years, I will look there.”

Once he finds a fraudster, Cohen will travel to his or her location and attempt to capture the scammer on video. If the insurance money already has been paid out “you will be put on the wanted list,” the investigator says. “You could be extradited. I work with the FBI, I work with the Secret Service, I work with U.S. marshals” and Interpol, the international police organization.

If Cohen can get you back into the U.S., “generally you will get prosecuted for a fake death claim.” For those who are found guilty, a 10-year sentence is not uncommon.

Faking a death isn’t worthwhile

Dewald says it takes more than the lure of money to hatch a scheme that requires you to abandon your home and assume a new identity. People attracted to such crimes “are running from something or somebody.”

For most crooks, giving up their identity ultimately isn’t worth the payoff, says Chicago-based psychologist Elizabeth Lombardo, author of “A Happy You.”

“They are not thinking that ‘for the rest of my life someone will be looking for me,'” she says. “That is a huge source of stress. It can cause us to go into depression.”

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