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EVE Evolved: Insurance evolved


The EVE Evolved column hits its second anniversary in two days on April 27th. To celebrate, last week I gave readers the chance to win an expensive faction battleship of their choice worth around 500 million ISK. You submitted a horde of great ideas for future column posts, which I whittled down to a final list of 49 fantastic ideas that would really suit the column. It was really tough to find one topic amongst them all that I liked best and wanted to write up first. Congratulations go to Massively reader Nanoko for making my personal favourite suggestion. In addition to winning a faction battleship, Nanoko's winning idea forms the basis for this week's anniversary edition of the column on the upcoming insurance changes and the impact they'll have on EVE. Special mention goes to Massively reader Aimlis who came up with a similar idea. It was unfortunately a little too close to Nanoko's suggestion, which came first. Nanoko has been contacted to arrange receipt of the prize!

At the end of March, CCP announced that the Tyrannis expansion would include a wave of changes to ship insurance. Currently, players receive insurance payouts for losing a ship based on the value of the minerals that went into its construction. The mineral values used in this calculation are as old as EVE Online itself and over the years have slowly dropped out of step with market prices. As a result, Tech 1 ships are almost free to lose under the current insurance scheme while Tech 2 and 3 losses are barely compensated for at all. Once Tyrannis hits, CCP will periodically adjust the mineral prices used in insurance calculations based on a weighted average of market prices across EVE. This has huge implications for PvP, the composition of fleets and the mineral market.

In this speculative opinion piece, I examine the effect the insurance changes could have on everything from ships used in PvP to the mineral market.

Competing roles:

The entire purpose of the insurance system is to cushion the monetary blow of ship losses and thus promote PvP. Thanks to insurance, losing a fitted battleship that cost around 100 million ISK may only put a 20 million ISK dent in your wallet. This system has always worked amicably for Tech 1 ships but Tech 2 ships are barely covered by insurance for a fraction of their market value. When considering whether or not to field a Tech 2 ship in PvP, you have to keep in mind that you may get similar or better performance from a Tech 1 ship of a larger size class which would cost a lot less to lose.

A Tech 1 Brutix, for example, deals more damage than a Tech 2 Deimos and can take more of a beating but it costs much less to lose. As a cruiser hull, the Deimos has the advantage of higher speed, better maneuverability and a lower signature radius. While the Deimos may make sense in a gang where high mobility is essential, the Brutix is almost universally better for other gang types. Similarly, assault frigates are intended to fill an anti-frigate role and pick off enemy tacklers, but that role can be filled roughly as effectively by much cheaper but less mobile Tech 1 destroyers or cruisers.

The price of failure:
The problem is that some Tech 2 ships have roles which overlap with larger Tech 1 vessels. While most Tech 2 hulls have have unique abilities or roles in PvP that keep them in popular use, some can be outclassed by Tech 1 ships of a larger size category in a given role. This limits the roles and fleet types those ships are useful in, and that's something I think we'll see start to relax when the insurance changes come in. As the new system promises to cover Tech 2 and 3 ships for a percentage of their true market value, they should become much more viable to use in PvP in place of standard Tech 1.

With proper rates on Tech 2 insurance, the gap between losing the example Deimos and Brutix will be significantly closed. Depending on where ship prices stabilise, a Brutix fit with Tech 2 modules will cost between 15 and 20 million ISK to lose. With roughly 100% coverage and a 30% insurance premium, losing a similarly fit Deimos could cost you as little as 40 million ISK. Taking a 20-30 million ISK higher loss in exchange for a faster ship with better maneuverability makes a lot of sense for those with a little extra ISK to burn. Under the current scheme, switching from a Brutix to a Deimos would hike up your loss by an uncomfortable 100 million ISK, which is much harder to justify. Exactly how much the gap between losses of this kind will close depends entirely on where ship prices stabilise and what kind of coverage we get on Tech 2 ships. At this point, all we can say for sure is that we're sure to see more Tech 2 and 3 ships on the battlefield when these changes go live.

Mineral market:
The mineral market is a complex beast that receives its own section of analysis in EVE's Quarterly Economic Report. Mineral prices are tied intrinsically to the insurance system because if prices fall below a certain point, it becomes profitable to build ships, insure them and self-destruct them. This quirk of the insurance system has had the unintended effect of giving players a way to turn minerals directly into ISK at a set rate. When supply of minerals on the market exceeds demand, mineral prices are pushed down by normal market forces until the point where it becomes profitable to commit insurance fraud on newly built ships. When minerals fall below this price point, they are quickly snapped up and used to commit insurance fraud for a profit. As the price can't drop below this imaginary line, the insurance system establishes a minimum price for ships and consequently price limits on the mineral market.

The new insurance system won't remove this price floor, but if the payouts on ships are brought in line with their current market values as planned, it will push the floor down by about 30%. Immediately following the release of Tyrannis, committing insurance fraud will cost you 30% of the ship's build cost rather than being almost free as it is right now. As mineral prices are being held up by the insurance price floor, they will likely begin to fall immediately to meet the new price floor 30% below the current one. CCP plan to periodically adjust the insurance prices to match the market average, but this might not have the effect they intend. As long as the supply of minerals outweighs the natural demand, each time they update insurance prices it will cause ship and mineral prices to drop until they meet the new price floor.

Ideal result:
Once the market reaches a state at which all of the mineral supply is being bought up, mineral prices will stabilise and we'll find out what the new ship prices will be like. To help this process along, CCP are reducing the market supply of minerals in Tyrannis by nerfing some of the ways in which they're produced. Mining remains unaffected but drone minerals and refined loot from missions are finally on the chopping block. If their changes are enough to stabilise mineral prices, we'll see ship prices equalise before reaching the new insurance price floor. This would be the ideal outcome and it's probably what CCP are hoping for.

If the mineral supply changes aren't enough to balance the market, ship prices will drop by 30% across the board before the next insurance price adjustment and remain there long term. At this point, CCP will know they have to reduce mineral supply further or increase demand by creating something new for players to build. It's a tricky balancing act that will require constant tweaking to stay effective, but with Dr Eyjo and his team of economic researchers on staff it's something that may finally be possible. Depending on how often his team adjust the new insurance values and what measures they take to balance the mineral market, it could take months for prices to finally stabilise. There's also no telling how price manipulations and market speculation might affect balancing efforts. We can only hope that when the market stabilises, prices are close to what they are now.

Linking insurance to the market value of ships and minerals has been a hot topic of debate over the years. It's always been thought that to do so would invite market manipulation and throw ship prices into chaos. CCP's new approach of manually adjusting the insurance prices and balancing the mineral market is sure to cause some chaos on the markets on May 18th, but if balanced well it's the perfect long-term solution. Only time will tell if they manage to make it work, but I'm definitely looking forward to flying more Tech 2 and 3 ships into PvP. I'd like to take the opportunity to thank everyone that entered last week's contest and provided some fantastic ideas for future column topics. Stay tuned over the coming year as many of those ideas will find their way into the column with a special mention to the reader that came up with the idea.

Brendan "Nyphur" Drain is an early veteran of EVE Online and writer of the weekly EVE Evolved column here at The column covers anything and everything relating to EVE Online, from in-depth guides to speculative opinion pieces. If you want to message him, send him an e-mail at brendan.drain AT weblogsinc DOT com. Congratulations Nanoko!

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