It's not really that insane. Microsoft just provides a very detailed privacy policy that covers every single possible scenario and clearly explains it to the us

It's not really that insane. Microsoft just provides a very detailed privacy policy that covers every single possible scenario and clearly explains it to the user. In any generic platform privacy policy, the same lines you quoted from their privacy statement would be summed up as "We collect [insert here] as required for operational and security reasons", "We use your data to perform business functions" and "Your data may be shared with third-party service providers such as payment processors". It's nothing scary and is what's required for Microsoft to operate as an entity. I'd also be careful how you interpret it. Microsoft's privacy statement applies to literally every single product and service they offer and acts as a catch-all, and from there they have independent statements that cover individual products in more detail. In this case, the diagnostics and feedback page describes all of the scenarios that they collect and use the information, and therefore the global statement isn't relevant.