It sounds like those insurers are offering insurance that's way too cheap for the risks of a deal purporting to give you 20% APY in free money. That, or the insurers are planning to run off with the cash too...
Yeah, they are basically just currently picking the pennies in front of the soon to come steamroller. Though in this case, the "insurer" has basically no regulatory obligations so the owners are probably making out like bandits. If the insurer has no money and no FDIC like scheme to back up any insurer failure, then it's just going to be the "investors" who will get wrecked.
As I mentioned in a sister comment, I don’t endorse any of these insurance products as I personally haven’t done the research. Also, as with any insurance product the devil is in the fine print and it pays to understand their ability to payout in a crisis.
That said, this is a fast-moving space with new entrants coming online all the time.
For example I just Learned about Ozone Insurance which claims to be a 100% trustless on-chain insurance plan [0]
Three separate insurance companies offer similar rates to protect stablecoin savings so the market seems to disagree. These are all well capitalized insurance programs run by well-known entities so - not fly by night outfits. That said none have been stress tested in a market crisis as yet.
My only argument is that anyone dismissing crypto as a scam with no use case who hasn’t taken the time to investigate is doing themselves a disservice.
This is a rapidly evolving field with lots of innovation and while it pays to be skeptical, it also pays to be curious.
Read my response to user SketchySeaBeast below. The 19.53% APY payout rate is not fixed and not guaranteed, just as the interest rate paid in bank savings is not fixed nor guaranteed.
The principle and any interest earned to date is insured if you purchase the insurance. Again, I don’t endorse the insurance products as I haven’t done the research, but elsewhere on this thread I mention Ozone Insurance which claims to be a trustless on-chain stablecoin insurance protocol.