There's a dark side to worldwide travel insurance – the fraud. The trouble is, it's notoriously hard to disprove fraudulent claims – especially in the travel sector and hundreds of people get away with it every year. Indeed, it's estimated to cost companies millions of pounds every year, and the extent of the problem is evidenced by this fact: there have been more worldwide travel insurance claims for Rolex watches, than have ever been manufactured. It's amusing on one level, but financially crippling on another - and damaging for all the honest types, who suffer higher premiums as a result.



Of course, there are far more risky instances of insurance fraud that have been taken – and often they've gone wrong in spectacular fashion. Here are 5 of the most memorable…

5. Mr Derek Nicholson

Derek Nicholson and his partner Jottie Nagle were accused of faking a drowning for a $1,000,000 insurance scam. Having taken out the life insurance policy just four days before the incident, it instantly seemed suspicious. After Nagle was told that she could not claim the life insurance policy for 12 years without a body, Mr Nicholson placed a call to the police claiming to have seen one matching his description, but this all unravelled when he was later found alive and well in New York. Despite pleading “not guilty” and claiming past confessions were not valid, they were convicted in 2004, and face a maximum 5 years imprisonment on the conspiracy charge and a maximum 6 years on the false distress charge.

4. Gaylan Sweet

This insurance scam is different from the others, as it actually is an inside job! Gaylan Sweet was a claims adjuster for Allstate insurance who concocted a scheme to share to defraud his company and pocket the money. Over 10 years, he pulled the same insurance scam twice, roping in two people to pose as parents of an imaginary child killed by an equally imaginary drunk driver and pocketing over $700,000 in the process. The case was a mixture of real and imaginary people: real deputy sheriffs' names were on police forms (though had never actually been involved in the case), real doctors had treated the fake children and there were various invented witnesses confirming the ‘facts'. Sweet and his accomplices were eventually arrested in 2002 and jailed for five years for insurance fraud.

3. Mr John Magno

John Magno is currently awaiting trial for arson in relation to insurance fraud. In 2001, there was the biggest fire in Toronto's history at Woodbine Building Supply – due to its almost residential location, more than 50 families were forced to evacuate their homes on Christmas morning. Of the two individuals assumed to have committed the arson – Tony Jarcevic and Sam Paskalis – the former died and the latter was severely burned and left in a coma. Paskalis later admitted his involvement in the alleged scheme. Magno himself had increased his insurance two months before the incident and tried to cash in the $3,500,000 insurance policy shortly after the “accident”.

2. Mr John Darwin

The most recent case in this list took the British media by storm when the full details were revealed. John Darwin went missing, assumed dead, after going canoeing in 2000. After a search turned up nothing, his wife claimed the insurance. Everything was quiet until December last year when the ‘dead man' turned up in a London police station claiming memory loss and the belief that he was a missing person. This unravelled when a photo of the couple grinning together in Panama was revealed in the papers. Suffice it to say, the court found the couple to have lied to their children, their neighbours and police in aid of an insurance scam, and were both jailed for over six years for their scheme as their trial concluded last month.

1. Mr John Stonehouse, MP

But the most memorable instance of insurance fraud has to be the former Labour MP John Stonehouse. On November 20th 1974, he faked his suicide. Leaving behind only a pile of clothes on Miami beach, he was presumed dead – but actually heading to Australia to start a new life with his secretary Sheila Buckley. In an unlikely turn, he was found a month later by police who mistook him for the still illusive Lord Lucan! While awaiting trial in Brixton prison, he still remained a Labour MP, eventually resigning 3 weeks before his trial. This left the Labour party in a bind, as they were suddenly a minority government. They ended up forming a Liberal-Labour pact to stay in power until Thatcher's election victory 3 years later.

As for Stonehouse, he was tried on 18 charges of theft, forgery and conspiracy to commit insurance fraud. He was sentenced to 7 years in prison, serving 3 of them before being released early due to his poor health.

Quite a lot of “Johns” in the list – perhaps that's a clue for us, when looking at fraudulent worldwide travel insurance claims!

Of course, not everyone fakes their own death as part of an insurance scam – in 2007, Bosnian Amir Vehabovic staged his death to find out who his true friends were! After bribing undertakers to bury an empty coffin, he hid in the cemetery bushes to see how many of the 45 people invited appeared to show their respects. When only his mother showed up, Vehabovic was left sending angry letters to the missing parties!

As worldwide travel insurance scams are harder to prove, it's no surprise there have been fewer high profile cases. It's easier to explain the sudden appearance of a ‘stolen ipod' than a man who died 5 years previously!