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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The Tories have missed a chance to show that they care about student debt

After condemning Jeremy Corbyn for his "betrayal", the government has still raised the top student interest rate to 6.1 per cent. 

For weeks, the Conservatives have assailed Jeremy Corbyn for his alleged betrayal over student debt. The Labour leader told NME during the campaign that he would "deal with" the issue. But he later clarified that this did not amount to a "commitment" to wipe out student debt (which would cost around £100bn) and that he had been "unaware of the size of it at the time". For this, the Tories have accused him of Clegg-style hypocrisy. 

There is little sign, however, that the attack has proved effective. Labour’s manifesto said nothing on the subject of student debt and Corbyn's language in the NME interview was ambiguous. "I’m looking at ways that we could reduce that [student debt], ameliorate that, lengthen the period of paying it off," he said. There is no comparison with the Liberal Democrats, who explicitly vowed not to raise tuition fees before trebling them to £9,000 as part of the coalition. Young voters still credit Corbyn for his vow to abolish tuition fees (were he to break this promise in power, it would be a different matter). 

A further problem for the Tories is that they have spotlighted a problem - student debt - without offering any solution. At present, graduates pay a marginal tax rate of 41 per cent on earnings over £21,000 (20 per cent income tax, 12 per cent national insurance and 9 per cent student loan repayment). This, combined with the average debt (£50,800), leaves them struggling to save for a home deposit, or even to pay the rent. The Conservatives, unsurprisingly, are unable to sell capitalism to voters with no capital. 

Yet rather than remedying this problem, the government has compounded it. The Department of Education has ruled out reducing the top interest rate on student loans from 6.1 per cent, meaning the average student will accrue £5,800 in interest charges even before they graduate.

By maintaining the status quo, the Tories have missed a chance to demonstrate that they have learned from their electoral humbling. Had they reduced student debt, or cut tuition fees, they could have declared that while Corbyn talks, they act. Instead, they have merely confirmed that for graduates who want change, Corbyn remains their best hope. 

George Eaton is political editor of the New Statesman.