Open source risks now insurable

Open source risks now insurable

Summary: Real insurance, the kind of policies Lloyd's writes, is a form of gambling.

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TOPICS: Open Source
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Lloyds BottlestopIt may sound silly, but Lloyd's of London is now willing to write policies against the intellectual property risks of open source software. (This Lloyd's bottlestopper is available for just 30 pounds, plus VAT and shipping.)

To understand why this is important, consider how the insurance business works. True insurance covers the unexpected.  Most medical insurance isn't really insurance per se, but a form of banking. We know you'll get sick (or at least be prescribed something to prevent it), so we estimate the costs and apportion them out.

Real insurance works differently. Real insurance, the kind of policies Lloyd's writes, is a form of gambling. A capital pool is created and risks are assigned to it. If there are no claims during the policy term, the investors get their money back, plus the premiums paid against it, plus any investment profits they can generate in the meantime. (On the other hand, risks can be unlimited, too.)

Before Lloyd's is going to write a policy, in other words, the chances of loss have to be pretty low.

Despite all the evidence found in courts so far, businesses are still being told there are risks to open source software. The point today is that smart money now knows how low those risks really are.

Topic: Open Source

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12 comments
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  • Do you want to be a face?

    That unlimited risk liability can be very damaging. Just wondering if you're considering adding your own cash.

    And I'd be curious about who the potential buyers of such policies might be and how much they're expected to pay.

    This doesn't show a negligible risk. It shows an insurable risk, which is different.
    Anton Philidor
    • Name, not face.

      Mondays...
      Anton Philidor
      • RE: Name, not face.

        Didn't have a beer last night and a coffee this morning I see...]:)
        Linux User 147560
        • Not entirely, no. (NT)

          ;-)
          Anton Philidor
    • "Real Insurance"

      It's all "Real Insurance" - hence it's all gambling. Geez - I gotta wonder sometimes about you guys....

      First of all - you never mentioned the time element in terms of premium - that is the real key to how money is made by an insurance company. Premiums come in, investments are made. Any claims paid out are done so after the investment is made and has started to make money. And no - not all people will be sick to use your example. There will be some people in the universe of your sample who will be very sick, there will be some in your sample who will get sick sometimes, and there will be some in your sample who will get sick very seldom if ever - you ever hear of acturial tables? All of these factors are taken in and premium is set up so that the company will make money.

      As to risk - Lloyds insured the Apollo moon shots - and they tend to insure risk ventures more than other insurance brokers or companies. The phrase 'insured by Lloyds of London' does not carry the cachet it once did.
      quietLee
  • Insurance means legions of lawyers ...

    Perhaps some folks don't understand that insurance companies are big time employers of lawyers. In fact, much of the value of the premiums goes to pay lawyers, NOT for actual claims. So what the implication is for Linux is that a whole new layer of lawyers will be added to the mix. Anyone suing an INSURED Linux user will not only have to battle IBM in court, but also insurance company lawyers. And this will spell the end of frivilous attacks on major users, thus eliminating legal harrassment by angry proprietary competitors. Using Linux will be significantly safer now. Attackers will face 1) in house lawyers, 2) vendor lawyers, and 3) insurance lawyers. Not much chance of a successful attack against a major Linux user now since the winner is usually the one with the biggest legal arsenal rather than the one with the better case.
    George Mitchell
    • Hooie - better check your facts George

      More FUD. Allstate for example pays out between 103 to 110% of their premium inforce. The revenue is made on investment - and the time element of money. And the company I work for is a Mutual - and we've given money BACK to our insured's as rebates during good years.

      Legions of lawyers? For what? Law firms are like any consultant group - hired for the task then given the boot when the job is finished.
      quietLee
      • Allstate?

        So you mean Allstate pays off on frivilous claims without a fight? Thats not what I've heard. When an issue is insured, the plaintiff has to sue the insurer first. That's what it boils down too, unless of course the insurer just pays out. And you are claiming that Allstate always just pays out. What a great environment for insurance fraud if this is the case. After all, anyone can make a claim.
        George Mitchell
        • He was responding to an exaggeration.

          You wrote:
          ... much of the value of the premiums goes to pay lawyers, NOT for actual claims.

          Insurance companies do pay claims, slowly and regretfully, but claim payments do exceed payments to lawyers.

          This post also exaggerates. Insurance companies do't have to be sued to pay claims, but nor do they pay any claim that appears.

          Such exaggeration isn't your usual style.
          Anton Philidor
        • Hoist your own petard dude

          Your comment:

          "Perhaps some folks don't understand that insurance companies are big time employers of lawyers. In fact, much of the value of the premiums goes to pay lawyers, NOT for actual claims."

          Hence my response. BTW insurance claims departments are staffed with a lot of regular folks that DO NOT have j.d. as part of their name - and they ARE tasked with killing stupid and fraudulent claims.

          What happened - get poked with the emotion stick or sumptin'?
          quietLee
  • PeeWee Herman... Anyoneelse see...?

    Anyone else see the resemblance?

    http://i.i.com.com/cnwk.1d/i/z/1004/gou_hd.gif
    b.d.hi
  • Open source cost blowout!

    Insurance? Huh! It will mean more very expensive extra cost. Why any company would use systems that require such insurance?
    Wagadonga