Posted - 2009.11.30 14:03:00 - [1
Dominion is most likely to see an increase in courier activity (easier to create contracts, logistics getting more important, ...) so I'd like to know what people think of an insurance company for this segment of business.
Two or three thoughts I had:
Business model / Target group
Insurance for cargo/collateral only, no ships. For public hauling corps/individuals, and corp-internal logistics.
Risk assessment of business model of insuring corp/pilot:
type of ship, general type of cargo, area of operation. enter this in some kind of matrix and you get a risk evaluation, which then is used to determine the contract. Violations render the contract invalid (like, a high-sec hauler with low insurance rate gets caught in lowsec, thus no payment).
Monthly/quarterly rates, calculated by maximum insured value and a certain loss probability. Any input on this?
Also, most probably public funding...
Necessary for verification of losses. There have to be some standards (calculation of values according to Jita/buy/sell etc), along with the guarantee that API-Information is treated confidentially.
API excludes Blueprints from the insurance contract, because it does not distinguish between BPO/BPC.
One of the biggest obstacle. My thoughts on this:
The insurance payment will not be above a certain value, so that there won't be any incentive for fraud. The costs of conducting a fraud operation shall be higher than the possible gains.
The payment is therefore limited to the average drop rate of cargo (which is 50% iirc). For any higher value, the insurance corp would start to pay for the fraudsters costs. The maximum insurance value is also limited by the notoriuos „freighter-gank-equation“.
The insurance thus assumes, that every killmail is a fraud, which is unfortunate but the only way to deal with the environment in eve.
Customer C loses 1.5 B API-verified cargo, a fraud operation would net 750 M loot, so the maximum payment is 750 M. The Sum is 1.5 B again, but the scammer has costs of 300 M, which represent his overall losses. By this, I hope to remove any incentives for insurance fraud.
Another point can be to limit the insurance contract to ships, where ganking costs a lot (this excludes T1 haulers etc).
- Is it possible to see into courier packages via API? I remember seeing plastic wraps in killmails, so this could exclude all the public hauling corps.
- Which aspects of fraud did I overlook?
- Is there anyone with some input on the financing issue? I have no real clue about it, honestly.
How much money do couriers make a month, and how much would you be willing to pay for an insurance that will cover only half of your cargo? Are these rates enough to run the insurance?
Thanks for your replies!
Posted - 2009.11.30 17:43:00 - [2
Say you are successful in building a great courier insurance company - the most effective in the land.
What happens when a courier company (that customers already have relationship with) decide to offer the same insurance as an 'extra'? You are helpless in stopping them do so.
Instead of paying a fee of 5,000,000 ISK for the delivery of your cargo from A to B, a company could ask for 7,500,000 ISK - the additional 2,500,000 being the fee for 50% cargo value insurance. Their fees are variables that can rise and fall to match yours and there would be nothing you could do to stop them.
I think your idea could work if you built a relationship with courier companies and offered their customers 50% market value insurance in return for an additional 3-5% reward fee. In the good times you would get 3-5% of every courier contract through the corp (how would you monitor this?) which is nice but what happens when the freighter hits the fan of frigates and gets popped - losing you worst case scenario possibly 50% of 2 billion ISK cargo? Since you only cover 50% that’s just 1,000,000,000 ISK but since you are charging 3-5% (200,000) to make that 1,000,000,000 in order to pay for the loss you would need to carry out 5000 successful contracts. On 24th November, courier contract number 5000 for 2009 got issued to RF Freight. http://www.eveonline.com/ingameboard.asp?a=topic&threadID=1220334 It took one of the best courier companies nearly a year to reach the number of contracts needed to cover just one of your potential losses - in my experience you would lose a freighter a month if you were offering your services to 10+ courier companies.
50% is just too high. I think 20% would be much more reasonable but would a potential customer want to pay 3-5% extra for 20%? I probably wouldn’t.
Posted - 2009.11.30 18:51:00 - [3
I don't see this working. The customer can get a 100%+ payout on a failed contract already with a proper collateral level. If its for the courier, seems to me you'll only end up insuring high risk operations. Those that are low risk, and necessary to makes rates attractive to the high risk, won't sign up. Am I missing something?
Posted - 2009.11.30 19:01:00 - [4
Edited by: Liberty Eternal on 30/11/2009 19:21:24Edited by: Liberty Eternal on 30/11/2009 19:20:04
It depends what the OP is thinking of as his model. He might be thinking more of a general re-insurance policy for the individual or corp as a whole - for example, I insure your operation for a month, up to the value of one billion isk cargo, no matter how many journeys you make, and charge you 200 mil for it. Now that could be very profitable and you have a model and a market.
Insuring individual journeys = fail, of course.
I work in insurance - this industry needs insurance badly and just needs a model. If you look at the OPs post, he is talking about a general contract, and also API verification to make sure couriers don't take unnecessary risks and do what they say they do.
I think the OP has a good idea and with good finance and careful management, freighter re-insurance could be worth billions.
Edit: in fact, I would be prepared to work with the OP on this. We can offer a standard contract, and adjust the rate for risk to courier companies. We can reinsure to external financers meaning our start-up costs would be limited - no more than a few billion. Get, say, 50 contracts for a billion cover each, we have liabilities max at 50 bil, charge say 20-40% to begin with, that is a monthly income of 10-20 billion. Modify our criteria so income exceeds liability outgoings and you have a cash-generating business model
Most payments will be smaller than one billion (way smaller), and we would scrutinise every claim and have clauses to make sure the client behaves, takes defensive measures etc.
For example, we could take in 10-20 billion a month in payments, aim to pay out 5-10 billion, and with the rest of the money, we have a surplus to attract more investors and can extend our insurance. Also, if we only offer high-sec cover to begin with, it is practically going to be free money for us.
I probably don't need to add that insurance is major big business and a real cash cow
Ummon, do you work in insurance? If you have a good model, I can come into this with a billion isk start-up fund if you are looking for a business partner. We should have no difficulty raising finance for insurance it is a lucrative market
Also, I won't discuss too much about insurance modelling on here, but it is pretty easy to do