The skill loss associated with dying is a feature that keeps many pve/farmers from even attempting combat (or absolutely never trying a second time). Dying and having a key skill drop from 90 to 89 or even 89.5 is frustrating to top up. For a farmer wanting to give pvp a solid try would be faced with dying several times, and the effort to replace those skills is just not worth it, so they just don't do it. If you want to encourage pvp, this would be a straight-foward and effective way of doing it.
Considering that people with death insurance have no skill loss, there is nothing inherent to the 'hardcore' aspect or the 'healthy fear of dying'. The balance is between making money off death insurace vs encouraging more pvp. My experience in-game has been with the vast majority of farmer/builers just not doing pvp. From what I read on the forum, encouraging pvp is a major desire.
Remove Skill Loss Death Penalty