FSR Fondo Solidario de Riesgos/en

How the Insurance System Inflates Every Price You Pay (and There Is a Radical Solution)

1. Introduction: The Hidden Cost of "Tranquility"

Purchasing insurance is almost universally a frustrating experience. We face complex contracts, high costs, and an underlying distrust of the company that, in theory, should protect us. We accept it as a "necessary evil," a price to pay to operate in the world with a minimal safety net. But what if the very structure of private insurance were not only inefficient, but also designed to extract value from the economy and your pocket in ways you can't even imagine? This article seeks to uncover the most shocking aspects of the current system in order to present an alternative model based on a simple collaborative logic: if benefits and costs are shared, why not risks? This idea leads to a solution that is not simply an improvement, but the logical consequence of a more coherent system: the Solidarity Risk Fund (SRF).

2. Key Point 1: The "Hidden Tax" in Everything You Buy

1. The "Cascade Effect": The invisible tax that inflates prices by 30% or more. Every time you buy a product, you're not just paying for the materials and labor; you're also paying for the insurance of every company involved in its creation. This phenomenon, known as the "Cascade Effect," is a hidden tax we all bear without realizing it. The cost of one company's insurance is passed on to the next in the production chain, accumulating until it reaches the final consumer.

Let's take the example of manufacturing a smartphone whose actual production cost is €220. The company that extracts the raw materials adds its insurance costs to the price. The chip manufacturer, which buys these already inflated materials, then adds its own insurance costs. The assembler repeats the process, and so on. The result is devastating: the accumulated cascading insurance costs total €151.73 , representing 69% of the actual production cost.

This effect isn't limited to technology; it's repeated in everything, from a loaf of bread, whose price is inflated by 33% due to the same hidden costs, to the homes we live in. It's an invisible burden we pay for with every good and service.

3. Key Point 2: The Big Lie of "Sharing the Risk"

2. The Myth of Sharing the Risk: Where Your Money Really Goes

The official narrative tells us that "we all pay a little to cover the few who suffer losses." The reality is very different. When we analyze where the premium money goes, we discover that the system is fundamentally extractive. Of every €100 you pay to an insurer:

• €60 is allocated to pay for actual claims.
• €20 is spent on operating expenses.
• €20 becomes profit for the insurer.

Forty percent of your money won't cover any risk, but will instead maintain a parasitic bureaucracy . This reveals a fundamental inconsistency: the insurer's and the insured's incentives are directly at odds. The company's profit depends on denying or minimizing claims payments, creating an inherent conflict where the client's loss is the intermediary's profit.

"If we share profits 50/50 in AU50 and share operating costs, why not share the risks as well?"

4. Key Point 3: The Radical Alternative: A Common Fund Without Premiums or Fine Print

3. The Solution: Universal, Automatic Coverage, Funded by All.

In response to this inefficient and conflictive system, the Solidarity Risk Fund (FSR) emerged. It is crucial to understand that it is not a traditional state insurance program , but rather the logical consequence of a collaborative economic system where risk is shared directly, without extractive intermediaries. Its pillars are revolutionary:

• Automatic Universal Coverage: Policies, paperwork, and fine print are eliminated. Any registered productive activity is covered automatically and instantly. Protection is a right, not a product to be purchased.
• Funding from the Common Fund: Individual premiums disappear completely. The system is financed with a portion of a collective fund, eliminating the "Cascade Effect" that inflates prices. The cost of security becomes invisible and systemic, not an individual burden.
• Radical Transparency: The fund's rules are public and the data is auditable. This is made possible by auditable (open source) algorithms and immutable data on the blockchain , eliminating the opacity that allows insurers to justify abusive premiums and deny claims.
• AI Management + Democracy: The system combines the efficiency of AI-driven automated management for 90% of cases with oversight and strategic decision-making by citizen assemblies, ensuring that technology serves the common good.

5. Key Point 4: The Paradigm Shift: From Negligence to Prevention

4. Aligned Incentives: A System That Rewards Excellence and Punishes Negligence

The current system has a perverse incentive: once the premium is paid, there is little incentive to invest in preventative measures, as the cost of insurance often remains fixed. The FSR completely reverses this logic through the Common Risk Coefficient (CRC) .

The CRC is not a premium you pay; it's a dynamic metric that reflects the actual risk of a project. Rather than paying more for greater risk, a high CRC means a higher deductible in the event of a claim. This creates a powerful incentive for prevention: investing in safety measures (such as sensors or training) actively reduces the project's CRC, which directly translates into a lower deductible .

For example, a high-risk construction project with a baseline CRC of 2.0 can, through the implementation of sensors and safety protocols, reduce its CRC to 0.3, transforming it into an effectively low-risk project and drastically decreasing its deductible in the event of a claim. The result is a change in mindset: from passively accepting risk to a "race to excellence."

6. Conclusion: A Question for the Future

The contrast is stark. On one hand, a private insurance system that commodifies fear, operates opaquely, systematically inflates prices, and profits from conflict with its clients. On the other, a Solidarity Risk Fund that socializes risk as a common good, operates with radical transparency, reduces prices, and aligns incentives toward prevention and collective security.

The transition to a model like the FSR would represent an estimated global savings of €14.2 trillion annually . This figure, which may seem abstract, represents 14% of global GDP —a monumental amount of wealth freed from financial parasitism and channeled into real investment. Given this evidence, the choice seems clear.

The question isn't, "Can we afford FSR?" The question is, "Can we afford NOT to have FSR?"

Comparative Report on Risk Management Models: Private Insurance vs. Solidarity Risk Fund (SRF)

1.0 Introduction to Comparative Analysis

The purpose of this report is to conduct a technical and comparative analysis between the traditional private insurance system and the conceptual model of the Solidarity Risk Fund (SRF). This document will focus on the structural, financial, operational, and macroeconomic differences between the two systems, basing its analysis exclusively on the documentation provided on the SRF model. The objective is to offer a clear view of the fundamental divergences that define each model and their systemic implications

The two models being compared represent radically different approaches to risk management. On the one hand, the private insurance system operates as a market-based risk transfer mechanism, where individual entities (people or companies) pay premiums to an intermediary to cover potential future losses. On the other hand, the FSR is presented as a collective risk-sharing system, directly integrated into a broader economic framework, where risk is managed as a common good and not as a commodity.

The differences in their founding principles determine the alignment of incentives for each system, which in turn affects every aspect of its operation. These principles will be analyzed in detail below to understand the practical consequences of each model.

2.0 Fundamental Principles and Incentive Alignment

Analyzing the foundational principles and incentives inherent in each model is of strategic importance. These elements determine the behavior of the actors, the efficiency of the system, and ultimately, the final outcome for the participants and society as a whole. Divergence on this point is the root of all other operational and financial differences.

Private Insurance System: An Extractive Model

The private insurance model, according to the analysis presented in the FSR documentation, is characterized by an incentive structure that operates in an "inversely aligned" manner, which generates a fundamental conflict of interest between the insurer and the insured.

• Insurer's objectives:
  • Maximize premium collection.
  • Minimize the outlay for claims.
  • Implement clauses and processes that limit claims to protect profit margins.
• Insured's Objectives:
  • Minimize the cost of premiums.
  • Maximize the breadth and depth of coverage
  • To guarantee prompt and full compensation in the event of a claim.

This mismatch creates an inherent conflict where one party's financial gain directly corresponds to the other's loss. The model is based on an extractive mechanism where the intermediary's profit is the primary objective, not the optimal management of collective risk.

Solidarity Risk Fund (SRF): A Functional Solidarity Model

The fundamental principle of FSR is the logical consequence of an economic system (called AU50) where the benefits and costs of any project are already shared 50/50 between the entrepreneur and the community. With this partnership structure, the need for an intermediary to manage risk disappears, as it is more efficient to mutualize it directly

In the FSR, incentives are designed to be fully aligned between the individual and the collective.

• Incentives for the community:
  • Risk prevention reduces the number of claims and, therefore, the overall costs of the fund.
  • Lower costs for the FSR translate into a larger surplus in the Common Fund, which increases the "Planetary Dividend" distributed to all citizens.
• Incentives for the individual:
  • Investing in prevention measures directly reduces the "Common Risk Coefficient" (CRC) of your project.
  • A lower CRC means a lower deductible in the event of an accident, minimizing the personal impact.

Comparative Table of Incentives

Feature	Private Insurance System	Solidarity Risk Fund (FSR)
Main Objective	Maximizing intermediary profits.	Minimizing collective risks and costs
Parties' Relationship	Adversarial relationship (inherent conflict).	Partner relationship (shared objectives).
Value Stream	Extractive: 40% of premiums go to bureaucracy and benefits	Productive: 93-95% of the funds are allocated to cover risks and their management.
Risk Management	Risk is a commodity to generate profit.	Risk is a common good that is managed collectively

This fundamental difference in incentive alignment has direct implications for the financing structure and the distribution of costs throughout the economy, as will be discussed in the next section.

3.0 Financial Analysis and Cost Structure

The financing mechanism is one of the most critical divergences between the two systems, with a direct and profound impact not only on the participants, but on the cost structure of the entire economy.

Private Insurance Financing Model

This model is based on collecting individual premiums from each economic actor. The FSR documentation describes the distribution of these premiums as an "anatomy of extraction":

• 60% is allocated to the payment of claims.
• 20% covers the insurer's operating expenses.
• 20% constitutes the insurer's net profit.

This means that 40% of the total collected is absorbed by what is called "margin and parasitic bureaucracy" , instead of being used to cover the real risks of the insured.

The Cascade Effect

A key macroeconomic impact of this model is the "Cascade Effect." Since each link in a production chain must take out its own insurance, these costs accumulate and inflate the final price of the product. The example of the bread production chain illustrates this phenomenon:

• The farmer adds a 10% insurance cost to the price of wheat.
• The mill adds a 9% insurance cost on top of the already inflated price of the flour.
• The bakery and the store successively add their own insurance costs.

The result is that a product with a real cost of €1 reaches the consumer at €1.43, of which €0.33 (an additional 33%) corresponds to insurance hidden in the price.

FSR Financing Model

The FSR proposes the complete elimination of individual premiums . Instead, the fund is financed directly from the "Common Fund," a centralized fund that receives the system's economic flows (known as RUAC, derived from royalties for the use of natural resources, and DB50, representing 50% of the profits of all companies). The FSR retains a predefined percentage (estimated at between 15% and 20%) of these flows to cover all the risks of the economy.

This centralized model completely prevents the cascading effect. Since there are no individual premiums, insurance costs do not accumulate along the value chain, leading to a "benign deflation" in prices. The smartphone example is illustrative: eliminating the insurance costs accumulated in the production of its components and its distribution could reduce the final price to the consumer by 39% .

Comparison of Efficiency and Overall Cost

The following table summarizes the key financial differences between the two systems:

Metric	Private Insurance System	Solidarity Risk Fund (FSR)
Source of Funding	Individual premiums paid by each actor.	Direct contribution from the collective Common Fund
Management Costs	~40% (bureaucracy and intermediary profit).	5-7% (AI management and minimal human oversight).
Impact on Prices	Inflationary ("Cascade Effect").	Deflationary ("Benign Deflation").
Actual Cost (Family)	Estimated at €9,700/year (€2,500 direct + €7,200 hidden).	€0 direct cost to citizens.

These structural and financial differences are inevitably reflected in operational efficiency, coverage scope, and user experience in claims management.

4.0 Operational Efficiency, Coverage, and Claims Management

Operational efficiency and the nature of the coverage are key determinants of the user experience and the actual effectiveness of risk protection. In this area, the two models present diametrically opposed processes and philosophies

Operational Process and Coverage

The FSR process is designed to be highly automated, transparent, and fast, following a six-phase flow:

1. Automatic Registration: A project is automatically covered upon registration in the financial system. There are no policies or procedures.
2. Normal Operation: Risk is monitored in real time using sensors and data, dynamically adjusting the risk profile.
3. Incident: The event is automatically detected by sensors or reported by those involved.
4. Expert opinion (if necessary): For complex cases, independent experts are assigned randomly and transparently.
5. Compensation: Once the claim is approved, funds are transferred in less than 48 hours for simple cases.
6. Feedback: The case data is used to improve prevention models and adjust system risk parameters.

This process contrasts sharply with the private insurance system, characterized by the management of complex policies, bureaucratic procedures, the existence of "fine print" and a claims process that can be lengthy and contentious due to misaligned incentives.

Scope and Structure of Coverage

The FSR is based on the principle of Automatic Universal Coverage , which protects all productive assets registered in the system without requiring explicit contracting. Covered risks include:

• Civil Liability
• Operational Risks (fires, thefts, etc.)
• Workplace Accidents
• Construction and Civil Works Risks
• Natural Disasters

Coverage is organized in a Three-Layer Structure designed to manage different magnitudes of risk:

1. Layer 1: Operational (90% of cases): Covers everyday risks up to 10M UVU per event.
2. Layer 2: Industrial (9% of cases): Covers complex risks (construction, logistics) from 10M to 500M UVU.
3. Layer 3: Planetary Reinsurance (1% of cases): Covers natural disasters and mass events with no coverage limit.

Unlike the opacity and "endless exclusions" of the private model, the FSR establishes a list of explicit and public exclusions : proven fraud, proven gross negligence, illegal activities, and damage to non-productive assets.

Refutation of Arguments from the Private System

The source text addresses and refutes what it calls the "Three Lies of Private Insurance":

1. "Spread the Risk": It is argued that this statement is partially false, since only 60% of the money collected is used to cover claims, while the remaining 40% is taken by the system.
2. "You Need Private Actuarial Expertise": It is argued that claims data should be public and mathematical models are known and automatable, so "private expertise" is a pretext for opacity and premium inflation.
3. "Competition Reduces Prices": It is claimed that the market is dominated by an "educated cartel" with tacit price collusion, where competition is more a matter of marketing than a real reduction of costs for the consumer.

Claims management and coverage are intrinsically linked to a proactive approach to risk management and prevention, which is another key differentiator of the FSR model.

5.0 Proactive Risk Management and Prevention Mechanisms

The FSR proposes a paradigm shift, moving from reactive risk management, focused on post-loss compensation, to a proactive model where the main objective is prevention. Incentive mechanisms are the cornerstone of this approach.

The Common Risk Coefficient (CRC)

The Common Risk Coefficient (CRC) is not a premium that is paid, but a dynamic metric that reflects the historical and current risk level of a specific sector or project. Its main function is to determine the deductible (the portion of the damage that the affected party assumes) in the event of a loss.

By directly linking the level of risk to the potential cost of a claim for the individual, the CRC creates a powerful direct economic incentive for prevention . A low CRC means a low deductible, and vice versa.

The following table summarizes the base CRC values ​​by sector to illustrate this classification:

Sector	CRC Base	Risk Level
Digital Services	0.1	Very Low
Construction	2.0	High
Mining	2.8	Very high

Incentives for Prevention

In the FSR (Free Insurance System), the logic is the reverse of the traditional system: instead of paying a fixed premium regardless of safety measures, investment in prevention has a direct and tangible return. Prevention actively reduces the CRC (Consumer Risk Ratio) and, therefore, the potential deductible in the event of an accident. This contrasts with the private system, where the incentive to invest in prevention is weak, as the premium does not usually reflect these improvements dynamically and proportionally.

The "Prevention Bonus Table" illustrates how specific measures generate specific reductions in the CRC:

• Installation of 24/7 fire sensors: Reduces CRC by 10%.
• Using AI to predict machinery failures: Reduces CRC by 12%.
• Conducting voluntary external audits: Reduces CRC by 12%.

According to the document, a project that implements all available prevention measures could reduce its baseline CRC by up to 85% , transforming a high-risk activity into one of effective low risk.

Protections Against System Abuse

The FSR model incorporates mechanisms to protect against fraud and moral hazard

• Fraud prevention: It is considered virtually impossible due to the combination of objective sensor data, AI pattern analysis, the immutability of blockchain records, and a very negative cost-benefit ratio for the fraudster (permanent exclusion from the system and criminal investigation).
• Prevention of moral hazard: It is mitigated through several mechanisms:
  • The dynamic CRC , which increases with accident rates.
  • The increase in the franchise for recidivism.
  • The social transparency of the risk history of each project.

Next, we will examine how these theoretical concepts are applied in comparative practical cases.

6.0 Comparative Case Studies

Case studies allow the previously analyzed theoretical differences to be materialized, providing a clear view of the tangible impact of each system in real-world scenarios.

Case 1: Furniture Factory (Operational Risk)

This case compares the operational risk management of a medium-sized furniture factory under both systems.

Metric	Current System (Private Insurance)	FSR System
Annual Cost	€88,000 (premiums, administrative fees, claims)	0 UVU (financed by the Common Fund)
Management Time	200 hours/year	0 hours (automatic coverage)
Claim Resolution	7 months	2 days
Actual Coverage	53%	96%
Price Inflation	+€21 per unit of furniture	0
Net Savings	—	~88,000 UVU/year plus the elimination of the administrative burden

Case 2: 6.8 Earthquake (Disaster Response)

This case contrasts the response to a large-scale natural disaster, an event that tests the fundamental resilience of any risk management system.

FSR System Response

The FSR's response, through its Layer 3 (Planetary Reinsurance) , is described as automatic, immediate, and complete:

• Automatic activation by seismic sensors and drone analysis.
• Release of emergency funds on Day 1 .
• 100% coverage of the value for destroyed homes, with no deductible.
• Complete reconstruction of the city to improved standards within 3 years .

Contrast with Historical Reality

This response contradicts the historical reality of similar events, such as the L'Aquila earthquake in 2009 under the current system:

• Only 10% of the buildings were insured.
• The compensations were partial, covering only 30-50% of the real value.
• The resolution time extended from 5 to 10 years , with many cases still pending.
• The result for families was debt, impoverishment, and lasting collective trauma.

The fundamental difference in outcome is clear: the FSR is designed to generate collective resilience and a rapid recovery, whereas the current system can lead to personal ruin and the disintegration of the social fabric after a catastrophe.

These cases, at both the micro and macro levels, illustrate the aggregate impact of each model on the economy and society.

7.0 Conclusion: Synthesis of Systemic Impact

The findings of this report demonstrate that the differences between the private insurance system and the Solidarity Risk Fund are not incremental, but rather represent two fundamentally different paradigms for conceiving and managing risk in a society. The former treats risk as a commodity subject to profit extraction, while the latter defines it as a common good that must be managed with maximum efficiency and solidarity.

The following table summarizes the key divergences at the systemic level.

Comparison of Paradigms

Private Insurance System	Solidarity Risk Fund (FSR)
Fundamental Logic	Commodified Risk: A business based on fear and uncertainty
Financial Flow	Value Extraction: based on individual premiums with 40% cost in bureaucracy and benefits
Relationship with the Insured	Inherent conflict: the interests of the insurer and the insured are opposed.
Macroeconomic Outcome	Cascading inflation: estimated real cost of 19 trillion euros/year (19% of GDP) that inflates all prices
Social Outcome	Fear and bureaucracy: generates financial anxiety, lack of protection, and post-catastrophe paralysis.

Ultimately, the analysis based on the provided documentation suggests that the choice between these two models is not simply a matter of technical feasibility. It is a choice about which structure is more logical, efficient, and beneficial for a society seeking to align the incentives of all its members toward prevention, cooperation, and shared resilience.