Insurance musings
For whatever reason, I’ve had trouble turning an ISK in trading lately. Maybe I’ve lost my touch, maybe regional differences matter more than I really thought, or maybe the New Eden economy has fundamentally changed lately.
I’d thought to get back into tech II ship production. However, that hasn’t really worked due to intensely volatile moon resource prices causing shortages of key components. Supply and demand: not just a good idea, it’s the law. Never expected so much trouble getting quantum microprocessors at a decent rate!
So for now, I’ve refocused on tech I ship production and some limited tech II activity, at least where the numbers work out. Drones still make really great margins, so I’ve churned out those advanced Hobgoblins and Hammerheads as fast as my staff and labs can work. I intend to get some Ogres moving soon as well, but that might take another week or so before I see real results. Barrage ammo might work as well since projectile ammo has come back into vogue. Sometimes the simplest things still work the best, as an old Brutor boyfriend used to tell me…
Anyway, I have to say that the SCC might qualify as the worst-managed organization in the history of for-profit human endeavor (which is to say, our entire history). Everyone knows that their premiums can’t possibly cover their settlement payouts, so that business line must really hemorrhage ISK into the greater capsuleer economy. Maybe their market management works, because they get a piece of nearly every market transaction and contract out there to manage the data flows and maintain some semblance of order and regulation, but the insurance does not even approach something reasonable.
One case in point: evidently, they base their settlements on a mineral basket price from years ago. As we all know, mineral prices vary wildly (and I should really spend more time talking about the factors influencing those another time). Here lately, those prices have plummeted. This does great things for production costs, of course, but that also means that the supply-demand equilibrium point has fallen, since we can sell our products more cheaply and still turn a profit. In a competitive marketplace (without collusion or other external factors), that means prices drop as well.
That ends up meaning that ship production costs have fallen below SCC insurance payouts.
Said another way, the SCC will actually pay you more than the cost of the ship.
But it gets better. Their contract lawyers must have let their kids write the documents because they will pay you under any circumstances. That includes intentional self-destruction of the insured asset. Yes, the SCC specifically covers scuttling.
When my senior staff brought this to my attention, I thought that they had to have made a mistake. Even as poorly as the SCC economists have done their jobs, I assumed the lawyers would have done theirs. I mean, we’re talking about the human equivalent of slaver hounds, right?
So I built some Drakes in Oursulaert for about 24.4m ISK. The net payout on a Drake at Platinum insurance for 26.6m. (In fact, for a bit, Drake market rates in that system dropped below the insurance payout). I took on just the barest minimum of crew, enough to get us out of the docking bay, and as soon as we were clear, I shut down the engines and had them evacuate the ship back into station.
Then I engaged the self-destruct timer, waited a couple of minutes… and made about 10% margin. (I let other folks grab the salvage, but certainly you could do this at a safe spot and go back for the salvage yourself.)
Now, I could keep doing this all day long and suck money right out of the SCC’s pockets. Even though the market rate for a Drake usually exceeds that 26.6m ISK, you have to wait a little longer for somebody to come along and fill the sell order, so an immediate 10% compounds more quickly than 15% that takes a day or two, at least in raw return.
Really, this kind of feels like insurance fraud. But since the contract explicitly allows this, I don’t think that it actually defrauds anybody. They just made an incredibly bad business decision.
I still don’t like it, though. I mean, I’ll take advantage of somebody else’s mistake, sure, but it seems like an even bigger waste never to let the ship do its thing. Not every ship looks nice, but these vessels represent something approximating the pinnacle of our species’ technical achievements. They should at least get the chance to do their jobs. Maybe pilot error loses them sooner than anticipated, of course, but that seems like a separate problem.
I know this sounds a little irrational. Anthropomorphizing a podder ship? Yeah, my implant probably needs a service visit. But I’d rather see the SCC get its act together, implement some sort of dynamic settlement payouts (and hey, while they’re at it, take a look at payouts for tech II and tech III ships).
Until then, I’ll keep building ships and making them available to pod pilots for slightly better return. No promises when market rates drop completely below insurance payouts, though…
Image credit Boogies with Fish