Real Insurance for Fantasy Football
Fantasy football is big business. And where there’s business with money at risk, insurance is sure to follow.
Fantasy football participants might be surprised to know that there is now an opportunity to buy real insurance that provides coverage when players on their teams have season-ending injuries.
The Fantasy Sports Trade Association (FSTA) estimates that 41 million people play fantasy sports annually, with the overwhelming majority — 33 million — engaged in fantasy football.
Major corporations including ESPN, Yahoo!, and the National Football League have created online platforms for fantasy leagues. Writing at MSN Money, Jeff Cade cited estimates of the economic impact of fantasy sports “at more than $2 billion a year, including advertising, player fees and players’ related spending.”
The NFL has directed all teams to display fantasy statistics on scoreboards during games. ESPN also runs these stats on its news ticker.
And, at the most recent FSTA conference, representatives from the San Francisco 49ers and the Minnesota Vikings spoke about “how their new stadiums are being built with the fantasy sports player in mind.”
Playing in a fantasy league provides the opportunity to act like a combination general manager/head coach of your own NFL franchise — buying, selling, and managing the world’s top talent. (To avoid confusion, I will refer to the fantasy players as “owners” and to the NFL players on the fantasy team as “players.”)
Realism is a key part of the experience, and an owner’s skill in managing the draft, trades, and free agency is the key determinant of success. As with real football, injuries to top players can have a devastating impact on the season.
While participating in a fantasy league generally costs $100 to $200 per year or less, Cade reported that some leagues charge owners up to $10,000. A back-of-the-envelope estimate of market potential might look like this: If 10 percent of the 33 million players are willing to pay a $20 annual premium to insure a single player, that’s a $66 million insurance product each season.
While this figure currently would still be a fraction of premium levels for other niche property and casualty products, if priced right, and if growth in fantasy sports continues, the size of the market would be difficult to ignore. This market potential should likely entice more insurers to enter into the business.
Who Provides the Insurance?
Fantasy sports insurance is an online product. While publicly there is mention of a few players in this market, as of the time of this article only one product offering for the upcoming 2014 season appears to be available: FantasyPlayerProtect (FPP).
This product is offered through MiniCo Insurance Agency of Phoenix, and is underwritten through Hudson Insurance Group, an insurance carrier rated “A” by A.M. Best, and a member of Odyssey Re Holdings Corp. Hudson offers a wide range of property and casualty insurance products.
FPP is designed to recover costs for owners whose players experience season-ruining injuries. FPP’s policies define this condition in terms of the number of games missed. The coverage is triggered when a player misses eight or more games of a 14- or 15-week season, and nine or more games of a 16- or 17-week schedule.
The coverage is intended to replace the league entry fee, plus research expenses such as magazine or online subscriptions. FPP’s coverage maximum is $1,000, including up to $250 for ancillary research expenses.
Owners can insure as many as five players per fantasy team and 10 players per season with FPP, and FPP provides a list of approximately 100 players for whom coverage is available. The premium per player insured ranges from 9 percent — for a historically healthy player — to 13 percent for an injury-prone player — of the coverage amount, plus taxes and fees.
FPP promises to “settle valid claims within 30 days of the end of the regular sports season.”
Underwriting and Product Pricing
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).
While winning money playing fantasy football is legal, there is some concern over whether fantasy sports insurance is legal.
“It is undeniable that a fantasy football owner’s sole monetary interest in their players is based on the bet they made when paying the league entry fee,” Joseph Balice, senior associate of Ezra Brutzkus Gubner LLP, said to Law 360. “The whole purpose of the insurable interest is to prevent using insurance policies as a form of gambling — fantasy football insurance is a wager on a wager. It would make little sense that this could be an insurable interest.”
He also noted that insurers currently have no way of verifying whether or not an owner buying a policy actually has the insured player on his or her team. In this case, buying the policy could be interpreted as simply a bet on whether or not the player will sustain a season-ending injury.
Another problematic scenario is that of an owner who drafted a player and purchased insurance before the season, but then dropped or traded him before the required eight or nine games were missed. Clearly, systems for verifying valid “ownership” before paying claims certainly need to be developed.
Fantasy football is now becoming institutionalized as a legitimate part of the sport. In this context, it seems likely that these insurance products will also grow in popularity.
Kathryn Mueller’s Presidential Plans
“We want to make sure the breadth of what we’re doing is well known, because healthcare is really a team effort now,” said Kathryn Mueller, the new president of the American College of Occupational and Environmental Medicine (ACOEM).
Muller was installed as president on April 30 during ACOEM’s 2014 American Occupational Health Conference in San Antonio, Texas, but has been involved with the organization since 1992 as a board member, secretary treasurer, chair of several committees and eventually vice president.
Mueller is also a professor at the School of Public Health and Department of Emergency Medicine at the University of Colorado Anschutz Campus, the medical director for the Colorado Division of Workers’ Compensation, and member of the Rocky Mountain Academy of Occupational and Environmental Medicine.
As president, her goals center on expanding the role of occupational medicine in healthcare and society as a whole.
“It’s interesting that among the Western European countries and the U.S. and Canada, we really all have similar issues going on regarding cost of disability and understanding of what our specialty is and how we can contribute,” she said. “All of us want to show how we can benefit society in a larger sense, because our name — occupational medicine — kind of makes people think the only thing we know about it is people in the workplace. But actually wellness and disability management extends outside of the workplace, to any injuries.”
Those efforts include working with other associations and professionals in the occupational medicine field.
“We’re working on a paper on marijuana with the American Academy of Occupational Health Nurses. We have been meeting with industrial hygiene and safety associations because we think the message of improving worker health overall and decreasing disability spans many professions,” Mueller said. “We want to make sure we are reaching out to physicians, physician’s assistants and nurses who may not be board-certified but are practicing in our field. We want to educate them.”
“All of us want to show how we can benefit society in a larger sense, because our name — occupational medicine — kind of makes people think the only thing we know about it is people in the workplace. But actually wellness and disability management extends outside of the workplace, to any injuries.”
ACOEM has also been updating its practice guidelines, having just passed guidelines for opioids that stress analyzing the level of opioid use for workers in safety-sensitive positions. Revisions are also in the works for guidelines on low back pain, which Mueller anticipates will include changed recommendations on the use of injections.
Again emphasizing the breadth of occupational medicine, Mueller highlighted the guidelines’ focus on quality care with the ultimate goal of improved function.
“And that’s not true for every guideline out there,” she said. “We take those ideas from the guidelines and those of us in occupational medicine are training other physicians to follow that type of thinking, aimed at improving patients’ function and decreasing disability.”
With a view to overall population health, Mueller said ACOEM is pushing its mission of reducing the occurrence of disability in the first place, not just to maintain productivity and control costs for businesses, but to keep society healthy.
“We’re the only specialty that does that,” she said.
5 & 5: Rewards and Risks of Cloud Computing
Cloud computing lowers costs, increases capacity and provides security that companies would be hard-pressed to deliver on their own. Utilizing the cloud allows companies to “rent” hardware and software as a service and store data on a series of servers with unlimited availability and space. But the risks loom large, such as unforgiving contracts, hidden fees and sophisticated criminal attacks.
ACE’s recently published whitepaper, “Cloud Computing: Is Your Company Weighing Both Benefits and Risks?”, focuses on educating risk managers about the risks and rewards of this ever-evolving technology. Key issues raised in the paper include:
5 benefits of cloud computing
1. Lower infrastructure costs
The days of investing in standalone servers are over. For far less investment, a company can store data in the cloud with much greater capacity. Cloud technology reduces or eliminates management costs associated with IT personnel, data storage and real estate. Cloud providers can also absorb the expenses of software upgrades, hardware upgrades and the replacement of obsolete network and security devices.
2. Capacity when you need it … not when you don’t
Cloud computing enables businesses to ramp up their capacity during peak times, then ramp back down during the year, rather than wastefully buying capacity they don’t need. Take the retail sector, for example. During the holiday season, online traffic increases substantially as consumers shop for gifts. Now, companies in the retail sector can pay for the capacity they need only when they need it.
3. Security and speed increase
Cloud providers invest big dollars in securing data with the latest technology — striving for cutting-edge speed and security. In fact, they provide redundancy data that’s replicated and encrypted so it can be delivered quickly and securely. Companies that utilize the cloud would find it difficult to get such results on their own.
4. Anything, anytime, anywhere
With cloud technology, companies can access data from anywhere, at any time. Take Dropbox for example. Its popularity has grown because people want to share large files that exceed the capacity of their email inboxes. Now it’s expanded the way we share data. As time goes on, other cloud companies will surely be looking to improve upon that technology.
5. Regulatory compliance comes more easily
The data security and technology that regulators require typically come standard from cloud providers. They routinely test their networks and systems. They provide data backups and power redundancy. Some even overtly assist customers with regulatory compliance such as the Health Insurance Portability and Accountability Act (HIPAA) or Payment Card Industry Data Security Standard (PCI DSS).
1. Cloud contracts are unforgiving
Typically, risk managers and legal departments create contracts that mitigate losses caused by service providers. But cloud providers decline such stringent contracts, saying they hinder their ability to keep prices down. Instead, cloud contracts don’t include traditional indemnification or limitations of liability, particularly pertaining to privacy and data security. If a cloud provider suffers a data breach of customer information or sustains a network outage, risk managers are less likely to have the same contractual protection they are accustomed to seeing from traditional service providers.
2. Control is lost
In the cloud, companies are often forced to give up control of data and network availability. This can make staying compliant with regulations a challenge. For example cloud providers use data warehouses located in multiple jurisdictions, often transferring data across servers globally. While a company would be compliant in one location, it could be non-compliant when that data is transferred to a different location — and worst of all, the company may have no idea that it even happened.
3. High-level security threats loom
Higher levels of security attract sophisticated hackers. While a data thief may not be interested in your company’s information by itself, a large collection of data is a prime target. Advanced Persistent Threat (APT) attacks by highly skilled criminals continue to increase — putting your data at increased risk.
4. Hidden costs can hurt
Nobody can dispute the up-front cost savings provided by the cloud. But moving from one cloud to another can be expensive. Plus, one cloud is often not enough because of congestion and outages. More cloud providers equals more cost. Also, regulatory compliance again becomes a challenge since you can never outsource the risk to a third party. That leaves the burden of conducting vendor due diligence in a company’s hands.
5. Data security is actually your responsibility
Yes, security in the cloud is often more sophisticated than what a company can provide on its own. However, many organizations fail to realize that it’s their responsibility to secure their data before sending it to the cloud. In fact, cloud providers often won’t ensure the security of the data in their clouds and, legally, most jurisdictions hold the data owner accountable for security.
Risk managers can’t just take cloud computing at face value. Yes, it’s a great alternative for cost, speed and security, but hidden fees and unexpected threats can make utilization much riskier than anticipated.
Managing the risks requires a deeper understanding of the technology, careful due diligence and constant vigilance — and ACE can help guide an organization through the process.
To learn more about how to manage cloud risks, read the ACE whitepaper: Cloud Computing: Is Your Company Weighing Both Benefits and Risks?