We have already considered the topic of transaction insurance once before. This method is perfectly applicable to the issue of guaranteeing transaction security and compensating for damages in the event of a breach of agreement by one of the parties. The need to resort to violence and forceful measures of coercion is thus eliminated, meaning this concept is fully implementable in the absence of a state monopoly on law enforcement, and indeed in the absence of any police or security agencies whatsoever. Furthermore, it is compatible with the concept of reputational institutions, which creates additional scenarios for its application. Even now, it is actively used in large transactions and in the lending sector. However, doubts are sometimes expressed regarding its applicability in small, everyday transactions.
The way accident insurance currently works can help us dispel these doubts. You have surely been in a situation where, when buying a ticket for a bus, train, or plane, you were offered insurance. Insurance is also offered when renting transport via a mobile application, even if it is just a bicycle or a scooter. Usually, the cost of such insurance is only a few dozen rubles, yet the compensation in the event of an insured loss reaches tens and hundreds of thousands.
See how easy it is? For a provider of risky services, there is no difficulty in concluding a contract with an insurance company and adding the option for their customers to take out accident insurance. This is even profitable for them, as they can receive additional profit from the insurance company for implementing its services. And in the case of transport rental, this matter is simplified to the press of a single button in a mobile application. Since this type of insurance is so easily implemented, there is no problem in making transaction insurance simple as well.
The parties sign a contract, after which it is uploaded to the insurance company’s application (or perhaps concluded directly within it). Then the application calculates the insurance premium rate and the participants of the contract pay it. That’s it. If one of the parties eventually breaches the agreement and the other party provides the insurance company with evidence of the breach, they will be entitled to an insurance payout, which should be sufficient to cover the damage caused. The party that breached the agreement, of course, will not go unpunished if reputational institutions are used alongside this. They will simply be placed on blacklists until they admit guilt and cooperate.
Even in the case of the most ordinary purchases, this concept is also applicable. At a self-checkout terminal, by pressing the corresponding button, or by asking the salesperson, one could also take out insurance. If the product turns out to be unsuitable, defective, or even worse, causes harm to the buyer, and the seller denies their guilt, there would be an opportunity to compensate for the damage through this insurance (and the seller, of course, would suffer reputational punishment). To attract buyers, sellers could add the insurance function and openly publish data on which insurance companies they work with. And those sellers who are unwilling to insure their sales can simply be bypassed by buyers as unsafe agents.
Some might criticize this idea by pointing out that buyers would now have to pay more for goods, and in general, all transactions would become more expensive. However, this is exactly what is happening right now. Due to VAT, excise duties, customs duties, licenses, and the tax burden on entrepreneurs, more than half of the cost of goods already consists of contributions to the state, including for the maintenance of a giant, organizationally extremely inefficient state judicial and police system. Transaction insurance, on the other hand, is a cheaper and more effective solution. Sometimes insurance premiums, where they are currently applied, amount to less than one percent of the transaction amount or the potential insurance payout. Thus, it is a much better solution than state bureaucracy and forceful control paid for by taxes.
