Tag Archives: fantasy insurance

Real insurance for fantasy sports

As of 2018, fantasy sports was considered to be a $13.9 billion market worldwide, forecasted to grow to $33.2 billion by 2025. In the United States, fantasy football alone is a $7 billion market.

About 70% of fantasy sports participants are competing in leagues that charge fees, with players spending an average of $653 on them. That’s not a huge figure, but there are leagues where the entry fees can be more than $100,000.

The increase in popularity of fantasy sports, along with the potential for a lost season due to a key injury, led to the creation of fantasy sports insurance in 2009. The first products were offered by Intermarket Insurance Agency with the backing of Lloyd’s of London. The latest information available showed that over $15,000 in losses was paid for the 2012 NFL season.

Milliman’s Jamie Shooks discusses how the risks in fantasy sports insurance align with the general traits of an insurable risk in the article “Fantasy sports insurance: Is it an insurable risk?

Top Milliman blog posts in 2014

Milliman consultants had another prolific publishing year in 2014, with blog topics ranging from healthcare reform to HATFA. As 2014 comes to a close, we’ve highlighted Milliman’s top 20 blogs for 2014 based on total page views.

20. Mike Williams and Stephanie Noonan’s blog, “Four things employers should know when evaluating private health exchanges,” can help employers determine whether a PHE makes sense for them.

19. Kevin Skow discusses savings tools that can help employees prepare for retirement in his blog “Retirement readiness: How long will you live in retirement? Want to bet on it?

18. The Benefits Alert entitled “Revised mortality assumptions issued for pension plans,” published by Milliman’s Employee Benefit Research Group, provides pension plan sponsors actuarial perspective on the Society of Actuaries’ revised mortality tables.

17. In her blog, “PBGC variable rate premium: Should plans make the switch?,” Milliman’s Maria Moliterno provides examples of how consultants can estimate variable rate premiums using either the standard premium funding target or the alternative premium funding target for 2014 and 2015 plan years.

16. Milliman’s infographic “The boomerang generation’s retirement planning” features 12 tips Millennials should consider when developing their retirement strategy.

15. “Young uninsureds ask, ‘Do I feel lucky?’” examines the dilemma young consumers face when deciding to purchase insurance on the health exchange or go uninsured.

14. Last year’s #1 blog, “Retiring early under ACA: An unexpected outcome for employers?,” is still going strong. The blog authored by Jeff Bradley discusses the impact that the Patient Protection and Affordable Care Act could have on early retirees.

13. Genny Sedgwick’s “Fee leveling in DC plans: Disclosure is just the beginning” blog also made our list for the second consecutive year. Genny explains how different fee assessment methodologies, when used with a strategy to normalize revenue sharing among participant accounts, can significantly modify the impact of plan fees in participant accounts.

12. Doug Conkel discusses how the Supreme Court’s decision to rule on Tibble vs. Edison may impact defined contribution plans in his blog “Tibble vs. Edison: What will it mean for plan sponsors and fiduciaries?

11. In her blog “Retirement plan leakage and retirement readiness,” Kara Tedesco discusses some problems created by the outflow of retirement savings. She also provides perspective on how employers can help employees keep money in their plans.

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Insurance can protect your fantasy football league investment

An estimated 33 million people participate in fantasy football each year, contributing to what has become a $2 billion industry. With some leagues charging as much as $10,000 to join, football fans should be happy to know that they can protect their investments by purchasing an insurance policy for their most productive players.

In his article “Real insurance for fantasy football,” Milliman’s Leighton Hunley offers some perspective on the underwriting and product pricing aspects of fantasy football insurance. Here is an excerpt from the article:

When you look at the existing FPP insurance product, the cost differential of insuring the highest-risk versus the lowest-risk players is relatively small. For example, consider an owner who pays an entry fee of $100 plus $50 on subscriptions and decides to insure his or her star player for $150. If the star is a low-risk player, the 9 percent premium comes to $13.50 compared to a premium of $19.50 at the injury-prone 13 percent rate.

Do those rates accurately reflect the risk exposure? Fox News reported that another provider paid out more than $15,000 in claims for the 2012 NFL season. But the story doesn’t say whether or not the total collected premiums made this a profitable line of business.

Technology is making more data available all the time, and this is easily accessible to insurers and fantasy owners alike. From an actuarial perspective, the player risk assessment needs to begin with historical injury data on the player’s position: How often do tight ends touch the ball? What is a quarterback’s exposure to injury on a game-by-game basis or a season-by-season basis?

Next, you’d address the player’s specific condition: How old is he? How long has he been in the league? Are there indications that his body is wearing down? If he’s a quarterback, you’d look at how often he gets sacked. If he runs with the ball, does he know how to slide or run out of bounds to safety? Or does he take the big hits — to show everyone how tough he is?

Finally, you’d move to a consideration of rule changes and trends in the league affecting how injured players are treated. Clearly, the overall NFL environment is now more cognizant of injuries, specifically head injuries, and rules are in place to make sure that there’s sign-off from the team doctor before players are permitted to come back in the game. Presumably, that rule would cut down on season-ending injuries.

But, at the same time, teams with more proactive approaches to protecting players might keep them out of more games, which could end up triggering more claims for the insurer to pay (note that FPP provides an email to policyholders containing a certificate of insurance, which provides details on how a claim will be triggered).

To learn more about fantasy football insurance, read Leighton’s blog post “Fantasy football insurance: An actuarial perspective.”

This article was published in Risk & Insurance.

Fantasy football insurance: An actuarial perspective

Hunley-LeightonAs we near the most exciting Sunday on the National Football League (NFL) schedule, I can’t help but reminisce about the year that wasn’t for my fantasy football team. I had high hopes this year, after drafting Arian Foster, Doug Martin, and Randall Cobb; I thought I was in great shape to finally win the league after years of just sneaking into the playoffs. Anyone who followed football this year knows that injuries crippled my team and dashed my hopes. I couldn’t help but think that there had to be some way to protect my $100 investment against these unfortunate events. So after briefly searching online, I discovered that I actually could insure myself against losing my precious superstars to injury with a product called fantasy football insurance.

Fantasy football insurance is currently offered by just a few insurance companies (and note that, perhaps due to its new nature and initially small but growing market, some of this coverage is only available at certain times of the year). The premium a policyholder pays to the carrier varies based on the probability of a given player getting injured during the year and generally averages around 10% of the league buy-in for coverage for a single player. In my case it would have cost me approximately $30 to insure all three of my stud fantasy football players who landed on injured reserve.

Like any line of insurance, there is an underwriting process to determine the appropriate premium to charge for the claim exposure of a football player missing significant game time during the season. Clearly, some players like Percy Harvin or Rob Gronkowski have a lengthier injury history than other players, warranting a higher premium for these types of players. These insurance companies crunch the numbers to determine the likelihood that a given player will get hurt and determine the payout to the policyholder given that player’s expected value to the fantasy team. Depending on which insurer you decide is best for you, the amount of coverage can vary so it’s good to get a couple quotes. Even the well-known Lloyd’s of London is an active participant as underwriter in this line of business.

Pricing this exposure requires identifying the players who will have a key impact on generating fantasy points and then applying a distribution on the likelihood of injury. Because each position has a different distribution for the likelihood of injury, pricing this type of product has its challenges.

From an actuarial perspective, starting with historical injury information is a good start. Using historical data, an analyst could track injury rates by position to determine statistically significant variances between positions. Standard and advanced actuarial methods could then be incorporated to project expected injury occurrences in the upcoming season. Adjustments would also need to be made for any rule changes the NFL implements between seasons along with significant trends that could alter the path of the rate of injury for a specific position. As an example, if the NFL changed the rules to allow quarterbacks to ground the football under any circumstances, then the historical injury rate of quarterbacks could drop significantly. Carefully considering the risks of fantasy football insurance can help refine the premium rates to balance expected loss costs with profitability. Insurers can obtain a greater market share if their pricing hits the sweet spot and helps them remain profitable in this line of business.

As the next football season approaches, I’ll be keeping my eye on the policies available to me to ensure I protect my investment in case I should draw the short straw again and lose key players to injury. However, I won’t fork over too much cash if I feel the price isn’t right.