I think you're taking the example of a systemic failure to mean that all such insurance is a waste of time. But most failures aren't systemic or massive.
It seems implausible that systemic failures for bitcoin in particular are going to be generational.
Insurance for entities subject to systemic failure is about having many hands looking the process and having the appearance of solidness. Appearance really is as important as reality for keeping such entities afloat.
You gotta admit "Insurance works most of the time" is kind of like a tight rope walker saying "that net that's there to catch me works most of the time, meaning that it definitely works when I don't fall and it makes people happier".
And my main point would be that state regulation and guarantees are the more serious measures and private insurance is not nothing but fairly weak affair. I'd trust regulation on a financial entity much more than I'd trust insurance on such an entity.
I too think regulation (either by peer or by government) is a much better guarantor than a hard-to-evaluate insurance policy. But the fact that insurance doesn't cover every eventuality doesn't make it useless. For example, my home insurance doesn't cover me against earthquake, a potentially catastrophic risk that comes with living in California. Of course I worry about this a bit, but earthquake insurance is very pricey at the same time. however, I don't consider ht einsurance I do buy to be a waste, since it covers me against fire, a tree falling on the house (of which there are several very large ones), a guest suffering an injury while on my property, etc.
The problem for a lot of Bitcoin service providers is that once the cost of regulatory compliance and even limited insurance (up to $5000 or something) is factored in, they won't seem especially competitive with other financial vehicles. Maybe the smart thing to do would be set up a bitcoin insurance firm first and make money out of the exchanges...
And indeed state guaranteed deposits are not covered against every risk. FDIC and the UK equivalent for private deposits in banks only covers up to GBP 100K or USD 250K (or at that level) anyway - good luck getting your millions of dollars back from the government when a bank collapses.
It seems implausible that systemic failures for bitcoin in particular are going to be generational.
Insurance for entities subject to systemic failure is about having many hands looking the process and having the appearance of solidness. Appearance really is as important as reality for keeping such entities afloat.
You gotta admit "Insurance works most of the time" is kind of like a tight rope walker saying "that net that's there to catch me works most of the time, meaning that it definitely works when I don't fall and it makes people happier".
And my main point would be that state regulation and guarantees are the more serious measures and private insurance is not nothing but fairly weak affair. I'd trust regulation on a financial entity much more than I'd trust insurance on such an entity.