Lost iPhone scam legitimacy?

My Mom's friend has her thinking if he turns off her iPhone 4S and claims that its missing that she's gonna only have to pay the 200 dollar fee and get another iPhone 4S and then have 2 for a cheaper price then buying them legit.

Does this crap work? This woman has my mom thinking that she has 6 iPhones by claiming them as "lost" when she just hides them, I need to know this As soon as possible because my mom is leaving on a trip to Vietnam soon and I don't need her trying to scam her way to a phone to give it to a relative in a different country, Obviously there's legal consequences but I'm not entirely sure on what they are, if any of you could confirm whether this is a illegal way of obtaining a phone, chances of getting caught as well as the consequences if caught. Thanks

Added (1). And yes, we have the insurance to cover the phone

Unless you have a phone insurance plan that covers theft, Apple is not liable to replace a stolen iPhone as far as I know. It would be inadvisable to try the scheme as well.

I don't know this for sure, but I strongly suspect they would disable the "lost" phone. I suppose it's not completely impossible to make it work again, but you'd have to jailbreak it and buy a new SIM at minimum. All-in-all this sounds like a pretty stupid plan, I don't think it's worth the risk.