Betting on a stranger's death is frowned upon, even if it might be legal

Joseph Caramadre, of Rhode Island, faces 66 criminal charges for an investment plan which happened to involve betting on the deaths of terminally ill people.

Should you be allowed to profit from a stranger's death? That's the question ProPublica poses.

Joseph Caramadre does not profit from death in a proverbial sense; he is not an arms dealer, or a tobacco farmer. Nor does he profit from death in an indirect way as, say, funeral parlours do.

He made his money through betting on when terminally ill people would die.

Jake Bernstein writes:

Society has long frowned on certain behaviors. Taking out an insurance policy on a friend or neighbor and killing them? Not acceptable. Taking out a life insurance policy that gambles your neighbor will die soon, even without your help, also crosses the line. Today, it is well-established law that one must have what is called an "insurable interest" before purchasing an insurance policy on someone else's life. The person who benefits from the policy must be a relative or business associate who himself would face financial or familial loss from the death.

Insurable interest worked fine for 200 years or so until the life insurance business itself changed. Despite its name, the industry doesn't sell as much "life insurance" anymore. Life companies now peddle financial services, particularly annuities. Variable annuities were developed in the 1950s, initially as a way to give teachers retirement options. Insurable interest was not an issue and could have been an impediment to widespread adoption of the product.

Caramadre did his research and concluded that Rhode Island law did not require that people buying variable annuities have an insurable interest.

In Rhode Island, in other words, you can buy an annuity for just about anyone. Which is what Caramadre did. Pick the right person, and if they don't die, your investment keeps paying out; if they do die, the "death benefit" kicks in, and your original capital is repaid.

The problem Caramadre ran into is that, although you don't need to have an interest in someone to take out an annuity in them, you do still need to have their permission. All good – you can follow his lead, and pay them a fee for the use of their name. Unfortunately, when the insurance company finds out what you're doing, it's tricky to prove that you haven't been engaging in large scale identity-theft. Because all your associates are dead.

In November last year, Caramadre and an associate were indicted on 66 counts; a criminal trial is scheduled to begin this November. Financial innovation isn't always pain-free, it seems.

A patient in a Colorado hospice meets the animal therapist. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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What did Jeremy Corbyn really say about Bin Laden?

He's been critiqued for calling Bin Laden's death a "tragedy". But what did Jeremy Corbyn really say?

Jeremy Corbyn is under fire for describing Bin Laden’s death as a “tragedy” in the Sun, but what did the Labour leadership frontrunner really say?

In remarks made to Press TV, the state-backed Iranian broadcaster, the Islington North MP said:

“This was an assassination attempt, and is yet another tragedy, upon a tragedy, upon a tragedy. The World Trade Center was a tragedy, the attack on Afghanistan was a tragedy, the war in Iraq was a tragedy. Tens of thousands of people have died.”

He also added that it was his preference that Osama Bin Laden be put on trial, a view shared by, among other people, Barack Obama and Boris Johnson.

Although Andy Burnham, one of Corbyn’s rivals for the leadership, will later today claim that “there is everything to play for” in the contest, with “tens of thousands still to vote”, the row is unlikely to harm Corbyn’s chances of becoming Labour leader. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.