Essentially you are giving the seller money and he/she guarantees you're insured

You are PAYING (not giving) for the guarantee in the same manner as you would pay the USPS for insurance. Do you consider it giving money to the USPS for their guarantee you're insured?

EXCEPT he/she doesn't spend any money on self insurance

By definition a self-insurer does not purchase insurance. If he did he would be an insured NOT a self-insurer. There is a cost to the self-insurer -- the cost of replacing lost or damaged merchandise.

just sends you new chips if lost in the mail

Replacing chips has a cost associated with it (obviously!!)

The money from the self-insurance simply increases the profit margin on the 99% that make it through USPS unharmed

Obviously you have not the slightest concept of the nature of insurance.

At least with a receipt, if nescessary from USPS, you know you actually paid for the insurance.

That's wonderful. You get a receipt!!! WOW! However, at least with Mike, you know you'll be satisfied if something happens to your merchandise -- a statement which cannot be made about the USPS.