I have seen it claimed in different places on the internet by different people that during WW2, more people died working on the V2 rockets than were killed by it. How truthful is this claim? If true, why did they fail to kill more allies?
The simple reason is that the premise of your question is slightly misworded; more people were indeed killed in working on the V-2 programme than by the rockets themselves, but very few of them were Germans. French, Polish and Russian prisoners made up the majority of workers (mostly confined in Mittelbrau-Dora concentration camp), and the slave labour that they were forced to provide took an extremely heavy toll. Jews and Roma were also forced to work.
Poor working conditions undoubtedly were a leading cause of mortality, as inmates frequently worked 14-hour days on inadequate rations, but they were also denied most other basic facilities necessary to stay alive. Sanitation facilities simply did not exist, with the exception of barrels serving as latrines. Housing initially consisted only of bunks stacked inside the tunnels (most V-2 production was underground), and the packed conditions undoubtedly sped up the transmission of disease. Inmates were often beaten, tortured, starved, or executed for trifling offences.
As a result of these conditions, an estimated 12,000 prisoners died, though this number is far from precise. Thousands of other prisoners, horribly weakened by the forced labour, were sent to other concentration camps, where very few survived.
If you compare that to the casualties caused by the rockets once they were used against the Allies, the roughly 9,000 casualties is undeniably fewer. Why?
Well, the V-2 was only active and effective from late in the war, and suffered from both accuracy and reliability problems. The latter was at least in part caused by poor manufacturing, and improved over time. Accuracy, however, continued be a major impediment, especially when good targeting intelligence was not available from the target zone. British disinformation campaigns served to misdirect approximately 50% of rockets targeting London toward less populated areas. Significant casualties were caused nonetheless, particularly in Belgium and Britain. Rockets could not be intercepted after launch, though repeated air attacks on launch and manufacturing sites reduced the V-2s’ operational utility. The speedy advance of Allied ground forces also threatened launching areas, and further distanced the rockets from their targets.
Tl;dr:
Harsh slave labour produced awful casualties. The V-2 wasn’t in use for long, and Allied casualties were ended by good counterintelligence and direct attack.