I have a feeling it was due, at least in part, to insurance, but even moreso due to the messed up prodo economy. After all the gold and item duping, the prices of everything became incredibly inflated and you were likely still selling crafted items at a somewhat "normal" price. You pretty much explained the rest of the story.I don't know whether there's any connection to insurance or not, but I stopped bothering with vendors on Europa ages ago. Everything I stocked for the benefit of players was cleaned out and taken to Luna to re-sell as soon as I finished loading the vendor. My choice was working flat out to try to keep the vendor stocked, leaving no time to play any other char or leaving the vendors standing empty 23½ hours out of every 24. I decided to stop spending all my time putting gold in someone else's pocket.
Siege has the only healthy economy in the game. I'd hate to see that balance undermined.
Without duping, I don't think we would see that exact scenario, but players who craft/imbue armor and weapons would take a severe hit. Most players would buy high end items for various templates/characters, etc, but eventually once everyone has the perfect suit, they wont likely be in the market for many of those types of items. PvP consumable type items would be their primary focus at that point.
I'm not at all fond of insurance. I think reducing the cost to equip and the risk vs. reward type changes are the way to go... if we can ever find an acceptable compromise that the majority can live with. Not an easy task, for sure.