Before I go into explaining the extreme yet overlooked difference between what I call insurance FRAUD and what I call the insurance EXPLOIT, I will list a few facts that are relevant to me and my thread :

Fact 1.
I play Drahkar and Brawn, I never participated in neither the fraud nor the exploit, and neither did my corporation. I'm looking at the problem as a third party who knows some people who were involved.

Fact 2.
A significant number of people who play this game also play or have played the very similar game Eve Online. Eve Online has a nearly identical insurance system which is why this is relevant.

Fact 3.
In the previously mentionned Eve Online, insuring a ship (equivalent of a bot in Perpetuum) and then blowing it up to receive the insurance payout is where the term Insurance FRAUD originated. It is NOT against the rules in Eve Online as it is a self balancing system. It is self balancing because the payout is usually slightly lower than the mineral cost of the ship but when the mineral cost goes down, people commit insurance FRAUD for a while until the mineral prices go up again and insurance FRAUD becomes unprofitable again. The profit made from this activity in Eve Online can be considered insignificant compared to the game's entire economy.

Fact 4.
People coming from Eve Online (and many of those who don't) cannot GUESS that insurance FRAUD is against the rules here. They are in fact very likely to assume that it is NOT. Just like they would be likely to assume that offering to triple someone's NIC and then breaking their promise is ALLOWED unless the opposite is mentionned in the rules somewhere.

Now that everyone is aware of these facts, let's look at the immense yet overlooked difference between Perpetuum's insurance FRAUD and Perpetuum's insurance EXPLOIT.

The Insurance FRAUD

Insurance FRAUD as mentionned above in the facts section has been going on for a while in Perpetuum. It involves either building or buying a bot, both of which cost significant time and/or NIC, insuring it for between 20 and 30% of the insurance's payout value, and then intentionally blowing it up to receive the insurance payout. This practice was and is still genuinely thought of by many honest (probably ex-Eve) players as a legitimate means of getting NIC in exchange for a bot. This means is chosen by some because of its self reliance (you don't need to find a buyer for the bot), for the extra profit (depending on the economy, it can sometimes be more profitable than selling the bot) and surely many other logical reasons (perhaps because blowing up a bot removes it from the market, while selling it could put it in the hands of an opponent).

The Insurance EXPLOIT (which may never have happened)

My knowledge of Perpetuum's insurance mechanics is very limited because I only used it to reduce my losses when dying in PvP, never making an actual profit from it since all my bots were obviously fitted with modules. What I have heard of after the punitive actions is that A SMALL PORTION of the insurance FRAUDers were also using an EXPLOIT to increase their insurance payout. By selling a bot (for example a Kain) back and forth to eachother for a ridiculously high price (for example 100 millions NIC), they would influence the game's insurance system into thinking that the average price that the bot was being sold for was much higher than it really is. This EXPLOIT increased the insurance payout and allowed people to make an much larger UNINTENDED profit from the otherwise legit insurance FRAUD. Note that I'm not sure if the EXPLOIT ever even happened, although it was most likely attempted, but this is the only type of activity that I see here that I think would deserve punitive action.

Hopefully many people will read this or already understand the difference between the two. The Devs have done a very poor job explaining these things and also a very poor job at punishing some innocent people (even some who were involved in NEITHER the fraud nor the exploit).

Sadly, I'm certain that some people with hidden agendas will continue spreading lies about how their opponents in a game are all dishonest cheaters, as if the developpers here haven't made a mistake about the way they handled this, and as if Infestation (I mention it because I see Infestation being targetted by the mob, despite the majority of us being entirely innocent) is one big borg collective where if one is guilty, everyone else is aswell.