Insurance and Shipping?

[jason taylor]

Originally Posted by malloyd

Who would the insurance pay out to? The racehorse case pays the owner, but if "nobles" have one there's something considerably more exotic about that society than the insurance policies. If your lineage goes extinct you are dead and have no living heirs, so who did you think deserved some extra money if that happened?

The dynasty would be incorporated. Indeed it would really have to be for a lot of purposes. Each heir would be insured for sterility to insure that he or she could carrt the estate or be used for matchmaking or similar such.

[whswhs]

Originally Posted by jason taylor

The dynasty would be incorporated. Indeed it would really have to be for a lot of purposes. Each heir would be insured for sterility to insure that he or she could carrt the estate or be used for matchmaking or similar such.

How do you spend the money if the policy pays off? If your house burns down you buy or build a new house. If your store is shoplifted you replace the merchandise. In this case, do you hire someone fertile to beget your children?

[jason taylor]

Originally Posted by whswhs

How do you spend the money if the policy pays off? If your house burns down you buy or build a new house. If your store is shoplifted you replace the merchandise. In this case, do you hire someone fertile to beget your children?

The money is owned by the family corporately like all it's assets, and distributed according to the directives of the head or council or however the articles say is appropriate.

If for instance the Montagues and the Capulets agree to a marriage some time in the future part of the treaty will be for each party to contribute escrow for the fertility of said marriage. As a corralary each will insure the heir pledged in the future marriage for payment of said escrow if complications arise.

Other ideas can be thought of. If the original party dies or becomes ill or injured and the replacement is not considered as genetically sound or does not carry as dignified of a title the other family is entitled to compensation. If one of the individiduals pledged balks at the last minute and runs off and marries a country singer that is also definitely cause for compensation. So on.

[swordtart]

With all insurance, the fundamental principle is that it pays out some sum of money if an event occurs (it is basically a bet).

The insurance company will make an assessment of the likelihood of the event occurring and the amount paid out vs the income from the premiums.

If they take in more money than they assess they are likely to pay out (generally averaged out over many such policies) then they can reasonably offer cover.

So if a given risk is 10% likely to occur over say a 25 year period and will result in a pay out of 10,000 then they need to take in more than 1000 in the 25 years as premiums. This assumes that the insured is contracted to pay premiums over 25 years, if they get to cancel the policy after a pay out then the premiums may need to be higher to counter that risk - basically the insurance company is insuring itself against an early cancellation.

It is for the insured to determine if a given cash payout will compensate them sufficiency for the loss. You can insure against loss of limbs, works of art, houses, vehicles and even intangibles like loss of voice (for singers) etc. The insured may identify that a loss of limb is equivalent to a loss of earnings and calculate the required payout accordingly. If they operate in a high risk environment the cost of premiums may be more than they can afford and thus they may have to downgrade their cover and accept that they are just reducing any financial impact of a loss rather than eliminating it entirely.

If could insure yourself against the loss of a child for example, how much money would you want? In reality no amount of money would enable you to bring it back from the dead (though in some traveller universes this might not be an absolute truth). That doesn't prevent insurance companies putting a definite value on human life as they must calculate premiums for public liability insurance for example).

In real-life calculating probabilities for each event and adjusting premiums accordingly is immensely complex. In a game it can be somewhat easier.

If for example the referee has determined/arbitrarily decided that the chance of piracy against your vessel in it's current sector is 1% per month and assumes that any occurrence will most likely result in a total loss of the vessel then he can easily calculate the average payout as 1% of the cost of the vessel per month. As not all losses will be total we can assume he makes his profit there and that the premium is also 1% of the total loss of the vessel per month. In order for this simple calculation to hold the insurers will have exemptions in the small print (as all real insurance policies do) that losses outside the sector, losses of cargo, loss of life etc. are uninsured, though these can be insured separately for additional premiums.

In some versions of traveller the chance and type of encounter is well defined per jump and as each jump is typically 2 weeks then it's all relatively straight forward. If your encounter tables are more complex then the referee has some more complex calculations to do.

What the insurance cannot cover is high risk activity, you will need to self-insure these as the required premium would likely be a significant proportion of the value of the ship and if you could afford them, it probably more cost effective for you to assume the risk.

Anything more complex than this becomes a burden for the referee and they should resist it strongly and adopt a different mechanism.

***

If you are just trying to find a way to keep your players heads above water for a short period you might be able to find more creative ways to unpick the inherent illogicality you end up creating by modifying your assumptions about the game world.

I had a similar situation in an different game (Car Wars) where I needed to keep the players in the game for a few weeks while their key cargo (and hence money making) vehicle was repaired. Car Wars has a very high turn over in vehicles and it is wholly illogical for any profit making organisation to lend someone a vehicle or insure their vehicle (which amounts to the same thing) at a price that is affordable. I decided 1% of the vehicle value per day was just about affordable, but the chance of total loss was way more than 1% and so it made no sense.

However I allowed anyone in possession of a hijacked vehicle to return it to the insurance companies and get a reward equal to 10% of it's market value no-questions asked. This is not wholly illogical as this was how "finders"/fences worked to "recover" your stolen goods in the 18th century before there were police forces who would do it for free. That meant that players who recaptured a stolen vehicle could get a reward without running the risk of being declared a bandit. It also means that bandits could do the same, but from the insurance companies mercenary viewpoint it made no difference. Now this means that losses would rarely be total and thus the premiums or rental fees could be reduced accordingly.

By a simple change to the game world I was able to rationalise loan vehicles (which are wholly dependent on being insurable against loss). Lending a vehicle was now cost effective as long as it survived 10 days on average without being captured (plausible) rather than the improbable 100 days it would otherwise have to survive.

[whswhs]

Originally Posted by swordtart

With all insurance, the fundamental principle is that it pays out some sum of mSo if a given risk is 10% likely to occur over say a 25 year period and will result in a pay out of 10,000 then they need to take in more than 1000 in the 25 years as premiums. This assumes that the insured is contracted to pay premiums over 25 years, if they get to cancel the policy after a pay out then the premiums may need to be higher to counter that risk - basically the insurance company is insuring itself against an early cancellation.

I don't think that's needed in the case you propose.

You specify 10% chance in a 25-year period. That's a 0.4% chance in a single year. So out of 250 policyholders, one will need a payout of $10,000 that year, in the long-run average. To cover it, the company needs to take in $10,000, and dividing that among 250 policyholders comes to $40. As long as the company has a large enough pool of policyholders to spread the risks over in a given year (if it has only 250, there's a risk of having two payouts and going broke!), it doesn't matter if they're the same policyholders from year to year.

[malloyd]

The fundamental problem with insurance (and finance in general) in an RPG is they are probability games for the investors. But in a dramatic work like a game, the probabilities, both good and bad, are completely out of proportion to the real world. They have to be, because unusually good or bad stuff happening to the characters regularly is what makes the thing entertaining.

If you let PCs get insurance, they are just about certain to be collecting it at some point, which makes it look way too cheap unless you set the rate so high it looks ridiculous from a real world perspective. Conversely people investing in PCs are likely to see returns well above plausible too, but that's usually an invisible departure from reality. If you push a finance model too hard, you're either going to end up highlighting the unreality of the setting that has stuff happen to the adventurers all the time, or you are going to need to adjust the odds for the PCs so interestingly extreme stuff *doesn't* happen to them very often, in which case the players will probably get bored and do something else. So it's usually better not push too hard and just gloss over this sort of detail.

[whswhs]

Originally Posted by malloyd

The fundamental problem with insurance (and finance in general) in an RPG is they are probability games for the investors. But in a dramatic work like a game, the probabilities, both good and bad, are completely out of proportion to the real world. They have to be, because unusually good or bad stuff happening to the characters regularly is what makes the thing entertaining.

One way around this is to provide that insurance always has a deductible.

There's a joke about two businessmen who meet in a vacation resort. One of them tells the other about the fire that burned down his business and gave him a million dollar insurance payout. The other describes the flood that gave him a ten million dollar payout. The first one leans closer and whispers, "How do you start a flood?"

To discourage that sort of thinking, insurance companies are reluctant to pay the full costs you incur by having a bad thing happen to you. You get back most of the value of your house or car, or you have to pay a few dollars on your medical bills, or whatever. This isn't a perfect deterrent, of course. But if the PCs got into trouble accidentally, and get back 90% of the cost of their starship or their medical expenses, they'll feel the bite.

And deductibles don't only deter fraud; they also discourage carelessness. (It's like the study decades ago that found that people who wore seat belts drove less carefully because they felt safer.) But discouraging risk-taking is obviously not something you want to do in an RPG.

[swordtart]

Originally Posted by whswhs

I don't think that's needed in the case you propose.

You specify 10% chance in a 25-year period. That's a 0.4% chance in a single year. So out of 250 policyholders, one will need a payout of $10,000 that year, in the long-run average. To cover it, the company needs to take in $10,000, and dividing that among 250 policyholders comes to $40. As long as the company has a large enough pool of policyholders to spread the risks over in a given year (if it has only 250, there's a risk of having two payouts and going broke!), it doesn't matter if they're the same policyholders from year to year.

I am not sure we are saying anything different?

So at 10%, 250 policy holders means 25 claims in 25 years or an average of 1 per year (as you say). Overall there needs to be at least 250,000 in premiums over 25 years. It doesn't matter if you say 40 per year per policy holder, or 1000 over 25 years per policy holder.

Having more policy holder certainly spreads your risks.

In the above I am glossing over the adjustments that would really have to be made to factor in inflation and the fluctuations in the value of money and services over the 25 years policy period and any required profits (I do that in my job, I am not willing to do it in my leisure time as well).

[swordtart]

There is always the risk of course that insurance doesn't cover you for what you expected.

Generally there are exceptions for "Acts of God", Civil Unrest, acts of war (whether war is declared or not) etc. Pretty much the sort of reasons players would loose their vessel.

Even with an insurance policy, you probably need a character with Insurance Law as a specialism to actually be able to get them to pay out on a claim. Players will try to preempt it all by examining the policy in detail, but in reality no-one really does and without the full knowledge of the relevant incident it will all be non-specific anyway and thus of limited value. They will need evidence to support the claim, police reports, manifests etc.

An insurance claim might be an adventure in itself (and probably should be if the loss came about from player foolishness rather than bad luck or referee caprice).