Prize indemnity insurance
Encyclopedia
Prize indemnity insurance is indemnification
insurance
for a promotion in which the participants are offered the chance to win prize
s. Instead of keeping cash reserves to cover large prizes, the promoter pays a premium to an insurance company, which then reimburses the insured should a prize be given away.
host or sponsor, reimburses tournament organizers for the cost of awarding a hole-in-one prize in the event a tournament participant successfully hits a hole-in-one during the tournament.
According to the newspaper USA Today
, the odds of an amateur golfer hitting a hole in one are about 1 in 12,500. These low odds allow golf tournaments to offer expensive prizes to golfers able to hit a hole-in-one during tournament play. In order to be able to afford such expensive prizes, tournament hosts can purchase prize indemnity coverage to protect themselves from having to pay for the prize from their own funds.
Typically, these hole-in-one contests operate as part of a marketing promotion
. In many instances, golf tournament hosts will offer a hole-in-one prize to promote a tournament sponsor. For example, if a tournament is being sponsored by a car dealership, the tournament might offer a new car from that dealership as the prize for hitting a hole-in-one. The relationship between the tournament host and the sponsor is usually set up to provide advertising for the sponsor, prominently displaying the sponsor's name next to the prize during the tournament.
Companies that provide hole-in-one insurance may provide signs or other accessories to help the tournament host promote the hole-in-one prize. The insurance contract between the golf tournament and insurance company will detail rules such as: which holes on the course the prize will be insured on, how to verify the hole-in-one was achieved legitimately, and what to do if a contestant hits a hole-in-one on a hole other than the insured hole. Variables that affect the cost of the hole-in-one insurance include: the number of participants in the tournament, the skill of the participants (amateur vs. professional golfers), the length of the insured hole, and the value of the prize being offered.
in basketball, field-goal kicks in football, home runs in baseball, blue-line goals in hockey and even retail
& casino
-based promotions as well.
For example, in the 2005 Super Bowl, prizes were set to be awarded for several events, including a return of the opening kickoff
for a touchdown
, a safety, and a fourth-quarter field goal
of 50 yards or more. Prize indemnity insurance was purchased to cover all these events. However, none of the events occurred in the game.
Most television game shows pay for prize indemnity insurance for million-dollar prizes. In 2008, such an insurance provider demanded RTL Group
toughen million dollar win provisions after The Price Is Right $1,000,000 Spectacular produced three millionaires in six episodes, reducing the million-dollar win provision in the Showcase from $1,000 to $500. However, this would have only produced one less winner had it been used at the start of the series, as one of the two Showcase winners was within $500, and the other won her million in the Million Dollar Game.
Indemnity
An indemnity is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnitor may or may not be responsible for the loss suffered by the indemnitee...
insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
for a promotion in which the participants are offered the chance to win prize
Prize
A prize is an award to be given to a person or a group of people to recognise and reward actions or achievements. Official prizes often involve monetary rewards as well as the fame that comes with them...
s. Instead of keeping cash reserves to cover large prizes, the promoter pays a premium to an insurance company, which then reimburses the insured should a prize be given away.
Hole-in-one insurance
One of the earliest and most common forms of prize indemnity insurance is hole-in-one insurance, which began to gain prominence during the early 1980s. Hole-in-one insurance, often purchased by a golf tournamentTournament
A tournament is a competition involving a relatively large number of competitors, all participating in a sport or game. More specifically, the term may be used in either of two overlapping senses:...
host or sponsor, reimburses tournament organizers for the cost of awarding a hole-in-one prize in the event a tournament participant successfully hits a hole-in-one during the tournament.
According to the newspaper USA Today
USA Today
USA Today is a national American daily newspaper published by the Gannett Company. It was founded by Al Neuharth. The newspaper vies with The Wall Street Journal for the position of having the widest circulation of any newspaper in the United States, something it previously held since 2003...
, the odds of an amateur golfer hitting a hole in one are about 1 in 12,500. These low odds allow golf tournaments to offer expensive prizes to golfers able to hit a hole-in-one during tournament play. In order to be able to afford such expensive prizes, tournament hosts can purchase prize indemnity coverage to protect themselves from having to pay for the prize from their own funds.
Typically, these hole-in-one contests operate as part of a marketing promotion
Promotion (marketing)
Promotion is one of the four elements of marketing mix . It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision....
. In many instances, golf tournament hosts will offer a hole-in-one prize to promote a tournament sponsor. For example, if a tournament is being sponsored by a car dealership, the tournament might offer a new car from that dealership as the prize for hitting a hole-in-one. The relationship between the tournament host and the sponsor is usually set up to provide advertising for the sponsor, prominently displaying the sponsor's name next to the prize during the tournament.
Companies that provide hole-in-one insurance may provide signs or other accessories to help the tournament host promote the hole-in-one prize. The insurance contract between the golf tournament and insurance company will detail rules such as: which holes on the course the prize will be insured on, how to verify the hole-in-one was achieved legitimately, and what to do if a contestant hits a hole-in-one on a hole other than the insured hole. Variables that affect the cost of the hole-in-one insurance include: the number of participants in the tournament, the skill of the participants (amateur vs. professional golfers), the length of the insured hole, and the value of the prize being offered.
Other prize indemnity insurance
In addition to hole-in-one insurance for golf events, prize indemnity insurance companies typically offer coverages for other types of contests as well. For example, contest coverage can frequently be purchased for contests such as half-court shotsHalf court
Half court is a term used in basketball for a shot taken from half court . It is most commonly used as a buzzer beater...
in basketball, field-goal kicks in football, home runs in baseball, blue-line goals in hockey and even retail
Retail
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
& casino
Casino
In modern English, a casino is a facility which houses and accommodates certain types of gambling activities. Casinos are most commonly built near or combined with hotels, restaurants, retail shopping, cruise ships or other tourist attractions...
-based promotions as well.
For example, in the 2005 Super Bowl, prizes were set to be awarded for several events, including a return of the opening kickoff
Kickoff (American football)
A kickoff is a method of starting a drive in American football and Canadian football. Typically, a kickoff consists of one team – the "kicking team" – kicking the ball to the opposing team – the "receiving team"...
for a touchdown
Touchdown
A touchdown is a means of scoring in American and Canadian football. Whether running, passing, returning a kickoff or punt, or recovering a turnover, a team scores a touchdown by advancing the ball into the opponent's end zone.-Description:...
, a safety, and a fourth-quarter field goal
Field goal (football)
A field goal in American football and Canadian football is a goal that may be scored during general play . Field goals may be scored by a placekick or the now practically extinct drop kick.The drop kick fell out of favor in 1934 when the shape of the ball was changed...
of 50 yards or more. Prize indemnity insurance was purchased to cover all these events. However, none of the events occurred in the game.
Most television game shows pay for prize indemnity insurance for million-dollar prizes. In 2008, such an insurance provider demanded RTL Group
RTL Group
RTL Group is Europe's largest TV, radio and production company, and is majority-owned by German media conglomerate Bertelsmann. It has 45 television and 32 radio stations in 11 countries...
toughen million dollar win provisions after The Price Is Right $1,000,000 Spectacular produced three millionaires in six episodes, reducing the million-dollar win provision in the Showcase from $1,000 to $500. However, this would have only produced one less winner had it been used at the start of the series, as one of the two Showcase winners was within $500, and the other won her million in the Million Dollar Game.