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During a break in the action of your favorite televised sporting event, an armchair
warrior just like you is about to attempt to win a million dollar prize by kicking a field
goal, slapping a hockey puck into a target or sinking a half-court basketball shot. Isn't
this too exciting to head for the kitchen for a snack? The prize sponsor is counting on
you and millions of other viewers to spend the next thirty seconds watching the attempt
while their name and logo are prominently displayed. The sponsor is also hoping for the
contestant to successfully make the attempt since it will gain additional free advertising
through news reports and guest appearances by the lucky person on talk shows.
As the excitement builds and the contestant carefully takes aim and a deep breath, so
too does an insurance underwriter somewhere in the world. He or she is hoping that the
contestant misses and therefore no claim is made on the specially tailored "prize
indemnity" policy purchased by the sponsor. For many years, prize indemnity consisted
mainly of golf "hole-in-one" coverage. Marketing efforts by sports franchises
and sponsors have grown into various skill contests for cash prizes, cars, and trips.
During the last ten years, the chance at a million dollar prize has become popular at
major events such as college and professional football bowl games; and baseball,
basketball, and hockey all-star events. The publicity value for such events became highly
evident when a near impossible three-quarter court basketball shot for a million dollars
was successfully made during a 1993 Chicago Bulls game.
Sponsors, in an attempt to obtain more athletically inclined contestants, want
qualifying preliminary tournaments rather than random selection of contestants at the
game. Moreover, the intensity of the competitive advertising needs calls forever
increasing prize levels. State lottery prizes in the tens of millions of dollars are now
commonplace. Jeffrey Butchen, President of Project Support Team, Inc., a promotion and
fulfillment firm located in Danbury, CT., recently revealed "A million dollars
doesn't carry the weight it once did when a million dollars was real wealth."
A dilemma exists for the insurance broker called upon to procure coverage for a
"mega-prize" promotion. It involves a balance between the clients' desires to
give away the highest prize at the least level of difficulty and the insurers' risk
comfort and capacity. The cost of insuring a prize ultimately becomes the deciding factor
in establishing final contest terms.
Although more insurance markets interested in providing this coverage have developed
over the past few years, there is still only a small circle of insurers specializing in
prize indemnity risks. Pricing and coverage terms for the same risk can vary widely from
one insurer to the other. A successful strategy for prize indemnity insurance purchasing
involves knowledge of each market's appetite, capacity and experience in particular risks.
In many cases, the development of a final promotion can take weeks or months of
negotiation until the promotion sponsor and insurers are both satisfied with the
particulars of contestant eligibility, rules, equipment compliance, monitoring and proof
of a successful win.
The next time you see a nervous contestant attempt to shoot a half-court basket or take
several puck shots at a hockey game for a chance at millions of dollars in prize money,
you can be sure that careful insurance negotiations took place to protect the prize
sponsor and fund a possible win.
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