Devoted to the Insurance industry and all thing related

I’ve never been to India let alone Mumbai but one thing I do know is that there are a lot of people living in that country.  To that fact Indian blogger Ganesh N. Kulkarni writes about the 6 million daily train commuters in Mumbai, of which a fair amount travel without paying for a ticket due to the difficulty of checking all travelers.  Apparently a Mumbai resident and train traveler invented an insurance scheme to take advantage of this giant problem.  

This story was picked up by the Freakonomics blog and the scheme was described as follows:

Here’s how it works. You pay 500 rupees (about $11) to join an organization of fellow ticketless travelers. Then, if you do get caught traveling without a ticket, you pay the fine to the authorities and then turn in your receipt to the ticketless-traveler organization — which refunds you 100% of the fine.
This is true entrepreneurship at its best.  A resident and occasional user of the Mumbai train system left a comment on the Freakanomics blog stating “the fine amount is 10 times the value of the ticket”.  In addition the commentator wrote, “If one gets caught without ticket, the process of paying fine is not a 2-minute affair.  They will take the offender to the nearest office, bunch of folks from enforcement agency will grill the guy for quite some time, which surely amounts to mental harassment.  It can be easily an hour long affair”.    

My guess is the people who pay into the insurance organization are either really sure they won’t be caught or gamblers.  I would imagine that the ticket price of $0.20 is expensive to some travelers so they would rather pay for the ticket than $11 for insurance or 55 days worth of tickets.  The fine is actually cheaper than the cost of buying into the insurance scheme.  What’s your take on this interesting scenario?