open All Channels
seplocked Features and Ideas Discussion
blankseplocked Insurance: a faucet or a sink?
 
This thread is older than 90 days and has been locked due to inactivity.


 
Author Topic

Ishtanchuk Fazmarai
Amarr
Posted - 2011.02.07 14:14:00 - [1]
 

Edited by: Ishtanchuk Fazmarai on 07/02/2011 14:17:18
This discussion has been ongoing for a while in another thread so let's move it here for greater fun. Laughing

My point, Insurance is a net SINK: the only source of ISK in game are NPCs, who give up ISK for blowing stuff, performing tasks, supplying minerals or being blown out (insurance). That is, PvE and harvesting print money out of thin air as players play the game.

Yet, as insurance is limited by resource harvesting -unlike missions- and as it consumes minerals and provides a payout smaller than supplyig them to a NPC agent, I consider insurance a net sink, as more wealth is destroyed than the actual ISK being injected into economy.

My (many) contenders' point, Insurance is a net FAUCET: all trade ingame is between players and nobody prints money out of thin air, which is fair and dandy until eevil insurance spoils it by giving money to a guy without removing it from another guy. Thus insurance adds money to the economy from thin air, acting as a money faucet and thus it devaluates ISK and causes inflation.

So what yo think: is insurance a net faucet or a net sink?

Oooh! Embarassed Wrong place! Embarassed Please, move it to general, please! Embarassed

Amaroq Dricaldari
Amarr
Vengeance Industrial Militia
Posted - 2011.02.07 14:23:00 - [2]
 

Why the heck are you asking THEM? Let's just go with my answer: It's both. Though, inflation might be a factor in my mixed asteroids idea... I can finally get that troll to shut up about dropping mineral prices.

De'Veldrin
Minmatar
Norse'Storm Battle Group
Intrepid Crossing
Posted - 2011.02.07 14:29:00 - [3]
 

Insurance is a faucet that offsets the sink of PvP/PvE losses. It does not, as you rightly point out, cover the total losses of the mineral value, but it does cover the bulk of it on T1 ships (T2 and T3 are another matter).

Insurance only becomes a complete sink when the cost to insure the ship exceeds the payout from losing it, which normally happens after the third or fourth time the insurance lapses and is renewed, assuming the ship lasts that long.

Keep in mind that something doesn't have to turn a profit to inject ISK into the economy.

Amaroq Dricaldari
Amarr
Vengeance Industrial Militia
Posted - 2011.02.07 14:51:00 - [4]
 

A single unit of ISK is worth Billions of any unit of Planetary Currency of EVE, so if you were living planetside, you could retire and live off of a single unit of ISK. Interisting fun fact about EVE, don't you agree? I wish I had a couple hundred billion units of ISK in real life and then stuffed them into the bank right now. Then I would just have to freeze myself and wait a thousand years, and I would be the richest person on the planet. Not exactly the most powerful, but definately the richest.

Cyniac
Gallente
Twilight Star Rangers
Posted - 2011.02.07 15:33:00 - [5]
 

You are talking about two different things.

Insurance is always a sink - you pay up ISK to insure your ship and those ISK go poof out of the system.

Insurance Payments (i.e. getting your ship blown up) - is always a faucet i.e. ISK are made from thin air and conveniently land into your wallet.

Whether the balance is a faucet or a sink is something I'm not quite sure is important, but my money is on it being a faucet. A large faucet at that.

chrisss0r
The Lowbirds
Posted - 2011.02.09 08:13:00 - [6]
 

Your mistake is to set isk = value

If you mine minerals you have created something of value
If you sell it you can get isk but there was no isk created. The overal isk in the system stays exactly the same (except for trade tax..)

if you build a ship out of those minerals and destroy it you get insurance money. this insurance money is created out of thin air, the amount of isk in the system gets bigger.

it's clearly an isk Faucet. Sure the amount of "value" is lower than in the beginning but that doesn't change anything, quite the contrary. The amount of "value" is lower which means there is not only more isk in nominal terms but also in relative terms to the amount of value in the system. For the individual it makes a difference but if you look at the whole system pouring out more isk and keeping the amount of stuff constant is exactly the same as keeping the amount of isk constant and reducing the amount of stuff. So insurance is a "double faucet" even if the secondary effect is very very small

The reason this is hard to understand is because in real life the central bank has a monopoly on money creation. so if a insurance pays you money it's just an exchange of currency not a creation. In eve insurance works as if you'd get your money directly from the central bank.

Btw eve does have a deflation issue rather than an inflation issue which means the amount of "stuff" grows quicker than the amount of iskies so asking for more faucets is not necessarily the solution to eve's problems.

(this is very simplified. you'd have to consider he velocity of circulation etc etc but you should get the idea)

Val'Dore
Word Bearers of Chaos
Word of Chaos Undivided
Posted - 2011.02.09 08:52:00 - [7]
 

Originally by: Ishtanchuk Fazmarai
My point, Insurance is a net SINK: the only source of ISK in game are NPCs, who give up ISK for blowing stuff, performing tasks, supplying minerals or being blown out (insurance). That is, PvE and harvesting print money out of thin air as players play the game.


Buy a shuttle and self destruct it. Where did that insurance payout come from?

Insurance is only a sink when you pay into it more than you ever get from it, which is rare unless you renew expired insurance often.

Quote:
Yet, as insurance is limited by resource harvesting -unlike missions- and as it consumes minerals and provides a payout smaller than supplyig them to a NPC agent, I consider insurance a net sink, as more wealth is destroyed than the actual ISK being injected into economy.


Resources and liquid currency are not the same. That 'wealth' has no ISK value until players set one.

Quote:
My (many) contenders' point, Insurance is a net FAUCET: all trade ingame is between players and nobody prints money out of thin air, which is fair and dandy until eevil insurance spoils it by giving money to a guy without removing it from another guy. Thus insurance adds money to the economy from thin air, acting as a money faucet and thus it devaluates ISK and causes inflation.


And they are right.

Quote:
So what yo think: is insurance a net faucet or a net sink?


It doesn't matter what I think, it is a undeniable fact that it is a faucet 99.99% of the time.

Kalia Masaer
Amarr Border Defense Consortium
Posted - 2011.02.09 16:46:00 - [8]
 

Insurance only is a sink when it expires and with platinum insurance it costs 1/3 of the pay out so this means that a ship has to survives having the insurance expire twice, before it has no net change on the total isk in the economy. If the ship is destroyed before hand it increase the amount of isk in the economy. Purchasing a ship or item only transfers isk it neither adds or removes it from the economy.

Very much a problem as I doubt most ships are destroyed on their third time getting insured, not only that an uninsured ship pays isk without having to have paid anything in. So it is extremely likely that insurance is a net ISK faucet.

Kallista Naari
Posted - 2011.02.09 17:17:00 - [9]
 

Edited by: Kallista Naari on 09/02/2011 17:27:21
Ok, I don't get why its a faucet.

You pay 50 million for a ship, and 10 million for insurance. You have paid 60 million for the ship. It pops, and you get 45 million, what happened to the extra 15 million?

I guess, if there were no insurance you would lose 50 million, and currently if you don't purchase insurance you get 1/4 or so of the ship's value. So, aren't all these scenarios a net loss of isk just at different rates?

Vmir Gallahasen
Gallente
United Mining And Distribution
Posted - 2011.02.09 18:28:00 - [10]
 

Edited by: Vmir Gallahasen on 09/02/2011 18:28:26
Originally by: Kallista Naari
Edited by: Kallista Naari on 09/02/2011 17:27:21
Ok, I don't get why its a faucet.

You pay 50 million for a ship, and 10 million for insurance. You have paid 60 million for the ship. It pops, and you get 45 million, what happened to the extra 15 million?

Think about it in terms of pure isk. Where did you get 45 million isk from? Where did your 60 million go? Every time you receive an insurance payment, isk gets created by the game and enters the system. It's therefore a faucet

Quote:
So, aren't all these scenarios a net loss of isk just at different rates?

A net loss of value. A net gain of isk. Different things

Val'Dore
Word Bearers of Chaos
Word of Chaos Undivided
Posted - 2011.02.09 19:00:00 - [11]
 

Originally by: Kalia Masaer
Insurance only is a sink when it expires and with platinum insurance it costs 1/3 of the pay out so this means that a ship has to survives having the insurance expire twice,


Actually you have to figure in the base (aka free) payout:

Plat Payout - Base Payout - Plat Cost = Total Value of Insurance

The second time you insure any ship, you have waisted ISK. And some would argue that insurance is never actually worth buying.

Tippia
Caldari
Sunshine and Lollipops
Posted - 2011.02.09 21:42:00 - [12]
 

Originally by: Kallista Naari
Ok, I don't get why its a faucet.
Because faucets and sinks are system-wide events, not something that happens in your wallet.
Quote:
You pay 50 million for a ship, and 10 million for insurance. You have paid 60 million for the ship. It pops, and you get 45 million, what happened to the extra 15 million?
You pay 50M for a ship — this ISK is transferred to another player and does not leave the economy.
You pay 10M for insurance — no-one receives this ISK. It is removed from the economy.
You get blown up and receive 45M — no-one gives you tisk ISK. It is added to the economy.

The 50M you pay for the ship are economy-neutral: it's just the same money being moved around between different owners (ok, not quite true — you pay taxes on the transaction so it's a minor sink, actually, but so small as to hardly matter on the whole). The 10M cost and the 45M payout, however, removed and added back ISK into the economy from an infinite sink and source — "faucet" — respectively. So in total, in your scenario, 50 million has been moved around without the economy noticing, but a net total of 35 million ISK have been added out of nowhere. This means that the insurance mechanism as a whole is a faucet.

As others have mentioned, it will only become a sink if you keep paying that cost without cashing out the pay-out until after the accumulated cost is more than the payout would have been. The thing is, this is a thoroughly unlikely event since most sensible players will have stopped paying for insurance long before this happens.

Belfelmalak
Posted - 2011.02.10 02:01:00 - [13]
 

It’s pretty simple really, as was stated above the minerals in the ship never bring ISK into the economy. People pay already existing ISK for it and convert the minerals into ships. At this point, no ISK has been created and you have a fully functioning ship.

You then pay 10 million to insure it. That 10 million has left the system. (Sink).

I blow it up and you receive 50 million ISK from the Insurance (net 40 million faucet)

We have now created 40 million ISK into Eve's economy...

Woodman2
Posted - 2011.02.10 03:05:00 - [14]
 

Without knowing how much is paid into insurance game wide, vs how much is paid out, it's impossible to determine.

Goose99
Posted - 2011.02.10 03:20:00 - [15]
 

Originally by: Woodman2
Without knowing how much is paid into insurance game wide, vs how much is paid out, it's impossible to determine.


I think it's safe to assume Eve insurance pays out more than takes in overall.Rolling Eyes

Donnovich Vacano
Posted - 2011.02.10 04:43:00 - [16]
 

The problem with this argument is that the answer depends on how often people lose ships. This is something that varies from player to player. I personally have owned upwards of 15 ships, all of which were insured, only 3 of which i lost. Does the money i got from loosing a few frigates balance out the money i lost by not loosing my legion. heck no! On the other hand if you are the type who likes to pvp in cheap disposable frigates you stand to gain by insuring your ships. Do the two balance out? Who knows. In the end it doesn't really matter. If it is a faucet it is more than balanced by the myriad taxes, and production costs, and skill books bough from npc's, and office rent, that make isk disappear. The value of your time is what controls prices in eve since there is no foreign power to compete with.

Goose99
Posted - 2011.02.10 04:55:00 - [17]
 

You pay 10 mil to insure it and receive 50 mil when it blows up. For it to be an isk sink on Eve economy, it means fewer than 1 out of every 5 ships insured in Eve get popped. This is unlikely. It's not 1:1 ratio, but 1:5.

DrDooma
Posted - 2011.02.10 05:09:00 - [18]
 

if all of the players spend more on insurance then they get from insurance then the end result is a net sync. Since every ship destroyed receives some sort of insurance pay out, I am almost certain that the amount of gold given to players is higher then that received.

Having sad, you are always better of selling the ship rather then having it destroyed so I don’t see any reason to even have this discussion.

Tippia
Caldari
Sunshine and Lollipops
Posted - 2011.02.10 08:25:00 - [19]
 

Originally by: Woodman2
Without knowing how much is paid into insurance game wide, vs how much is paid out, it's impossible to determine.
Fortunately, we know that because they published some numbers on it some time ago. It's roughly a 1:3 ratio between insurance costs and insurance pay-outs.

Magnus Orin
Minmatar
Wildly Inappropriate
Goonswarm Federation
Posted - 2011.02.10 17:15:00 - [20]
 

Insurance is a faucet.

If you are so stupid you cannot realize that after god knows how many threads about it, you are truly a hopelessly lost cause.

Insurance only adds isk to the economy.

Ships blowing does not remove isk from the economy, it removes minerals.


 

This thread is older than 90 days and has been locked due to inactivity.


 


The new forums are live

Please adjust your bookmarks to https://forums.eveonline.com

These forums are archived and read-only