Howto fix the problem:

If you can trust someone to hold your launchpad password in escrow, you can surely trust them to do the same with your encryption password.

In practice, I suspect you can just reset your launchpad password by email. So you have to rely on your ISP resetting your email password when you forget _that_. And that they don't go bust or disconnect you for using too much bandwidth making online backups :-)...

Yes, many people are likely to accept this service given the choice. But this is a pretty low bar to pass. We can and should do better.