The strange business of hole-in-one insurance
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If the insurance company doesn’t sell enough of these kinds of policies to reliably offset payouts with premiums, they might turn around and buy a policy from a reinsurance company with a $10,000,000 limit and a $100,000 deductible against their entire portfolio.
Thus, reinsurance companies spend a lot of time thinking about things that don’t happen very often but can be very expensive when they happen.
And yes, they had a division that did propositions like hole-in-ones, and also they insured legal betting companies against wild trifectas and that sort of thing.
I have a small trove of stories they told me about bizarre accidents that wound up costing enormous amounts of money.
This particular (small) reactor is insured for liability up to 1.2 billion euro.
We have been ignoring that massive risk in favor of "cheap" electricity for decades, and every time something happened, in the end the taxpayers had to cover the bill.
Nuclear simply is financially unviable once externalities are properly accounted for. Add to that cost and time overruns in projects, the still unsolved questions of where to dump the waste, of nuclear weapon fuel proliferation... and just forget about fission-based nuclear projects, please.
[1] https://www.manager-magazin.de/finanzen/versicherungen/a-761...
Renewables like solar and wind are great of course, but they're intermittent and cause weird issues like the Duck Curve. You still need base load from either nuclear or fossil fuels for a stable, reliable grid.
- loss of life and the economic productivity of people who died early (not just the liquidators, but also everyone who got radiation damage!)
- loss of sellability of goods - to this day, Bavarian shroom collectors and hunters have to check fungi or wild animals for radiation, and in particularly bad years up to 70% of wild pigs have to be discarded due to irradiation [1]. That's an economic loss for the hunters and for all subsequent economic activities (butchers, restaurants).
- healthcare cost associated with dealing with the fallout - cancers are the most expensive illnesses known to mankind
- loss of quality of life in those who were displaced by the Chernobyl and Fukushima disasters, additionally also the cost of relocating and the loss of opportunities, social networks etc. caused by the relocating
- loss of economic potential that could have been realized in the area around Chernobyl, had it not been contaminated
[1] https://www.welt.de/wissenschaft/article230648425/35-Jahre-n...
Also, these costs seem specific to a melt-down. Fukushima wasn't just poorly insured, it failed to heed studies warning about its location.
This isn't an unsolved problem, just an uneconomical one - there isn't enough waste for any of the possible solutions to be economical. The solution to getting rid of nuclear waste, is to produce enough of it to make R&D worthwhile.
> of nuclear weapon fuel proliferation
But how does this relate to power plants? The military will get its nukes, whether or not the plants are built.
The problem is that the plutonium will be created in the first place and needs to be taken extra care of to make sure the stuff doesn't get stolen or "misplaced" and then diverted off to terrorists.
And I it's great for the wealthy.
Forcing insurance on poor people is not right.
The poor have a tough enough time just keeping their head above homelessness.
I have been required to pay for automotive insurance in California for approximately 20 years. (In CA mandatory insurance was required, but not mandatory forever. There is a weird legal difference. I white knuckled my college years while driving. I got lucky except onetime. A wealthy women slammed into me, and the minute she, or actually her lawyer husband, found out I didn't have insurance, I was putty in their hands. I paid $1000 for an 1982 Volvo bumper. It was the last of my student loan, but they had me. A call to DMV and I wouldn't be able to commute to my school.)
Every year if I want to drive my old truck I needed to come up with $600.00 plus. Even with a perfect record since 15.5 years of age.
I only can afford the minimum. I never made much money even as college graduate. I believe it's 15-30-5. (this means if slam into you and you are a vegetable; you will get $15,000 for injuries, and $5,000 for your Tesla. Great payday? If you have money you can go after my assets.).
My point is it's not enough if we are being honest.
The insurance industry loves these minimum mandates because they make billions off the poor, and middleclass.
It's no wonder the insurance industry is always the number #1 Lobby group on every political fund.
It's a racket, and I believe the bigger boys are colluding on rates, but can't prove it.
"Buy the per mile insurance dude--you low income loser!"
(1. Work out the low income insurance on a yearly basis, and it's not copasetic. Plus my old Toyota does not have a computer other than a rudimentary computer that was suspose to control the main plunger in the naturally aspirated carb that never really worked. Meaning there's no computer to plug a mileage indication in. So there's no per mile insurance I can get.)
My point is mandated insurance is kind of a racket like this two year mandated Smog check, especially on vechicles that that we only use a few times per year, or under 1000 miles/per year.
Rant Over.
In /some/ places, car insurance is required by law. How does it work in places where it is not required by law? At first thought, it appears more financially risky to drive! I guess that insurance would be even more expensive because it is more likely that the other side is insured.
Looking this up for the US (the country where I live), it seems that only NH doesn't require car insurance (ninja edit: Virginia as well). So for me, this is an interesting hypothetical, but not in a way that's a part of my reality as I do not live in either of those two states.
>>At first thought, it appears more financially risky to drive!
As someone who does not own a car, and does not drive (and is poor - very poor in HN standards as well as in the city I live in), I would like drivers that I share the road with to have insurance, rather than drive without insurance. Getting hit by an uninsured driver would be an absolute nightmare that I doubt I could even afford to bring to court.
Not sure about the specifics of your car insurance but mine would cover that.
Just give poor people money, instead of a million special programs with extra bureaucracy and red tape.
And I know how OP worded their post, but legally in my state you have to have insurance and despite that not every driver actually has insurance. It's not like anyone checks your insurance when you put the keys in the ignition...
I'm not from Nova Scotia, but we have the same principle of mandatory insurance that has to cover also the accidents caused by people who are violating the requirements, which doesn't add much since the requirements are strictly enforced and violations are not that common, but mitigates those rare cases.
And what good is it trying to sue a “poor person”?
While I never had to sue anyone, I looked into all of the hoops you have to jump through to collect damages when I was a landlord. It wasn’t worth the time or the effort.
Because that is what uninsured motorist insurance is for? If you buy flood insurance and it floods…
They go to covering your risk of loss from damages causes by an actor from whom funds cannot be recovered.
> And what good is it trying to sue a “poor person”?
None, often, that's a large part of what you are insuring against by having uninsured driver insurance.
And in my original comment i was speaking to the nomenclature of "everyone has $1mm liability insurance" rather than anything else. I hadn't eaten all day and it shows in my comment history full of snark and toeing the line of being a decent person.
The insurance company was going to look into suing the driver, but it's not like there was even enough money there to pay for the lawyers.
Each driving session is statistically independent. The probability of you getting in a vehicle accident resets every time you get behind the wheel. The actual probability in each session varies based on things like your alertness level, vehicle condition, weather conditions, traffic levels, and so on.
Something you can do to reduce your premiums is to shop around every 3-4 years. Most of the big-name insurance companies will start raising your rates around that time-frame because they assume the hassle of changing companies will keep you with them (i.e. human inertia). Another way is to drive "old man" cars. They're usually bigger & heavier, and perform better in accidents than something small & zippy. So they get lower rates because the chance of high medical bills is reduced.
What's your evidence for that?
I'm going to assume you are a reasonably competent driver. Also, that your driving routine is pretty stable. Now these assumptions may not apply to you, but they do apply in general, which is what you need to set insurance risk.
Traffic density on your Wed commute to work is pretty stable week over week, with approximately the same percentage of over-tired or over-stressed drivers.
Your driving ability has probably not significantly improved over the last 6 months.
Thus, your chance of getting into an accident this morning on the way to work is independent of the chance of you having an accident next Wednesday.
Likewise, your chance of getting into an accident this morning is independent of the chance of your co-worker who lives on the other side of town but has a similar risk profile to you of the commute (same type of roads, same distances).
In general, in aggregate. Y
Someone who just had five accidents in the last three weeks might drive differently today, don't you think?
I'd love to hear some of these stories. I've never had any visibility into the world of insurance, but it's always kinda fascinated me.
Young man riding a motorcycle, accident, suffers catastrophic but non-fatal head trauma. Problem 1, part I: Requires assisted living for the rest of his life. Problem 2: He has the hormones of a young man, the muscles of a young man, but the intellectual capacity and emotional regulation of a baby. Requires a very specific type of assisted living care that can handle violent behaviour and possible sexual assault. Problem 1, part II: His lifespan is estimated to be longer than usual, because he can no longer do things like ride motorcycles, smoke cigarettes, or have a stressful job.
Put those things together, and the estimated total payout was well into eight figures. The motorcycle insurance company was on the hook for his care, and they had insured their portfolio, so everything over their $1,000,000 deductible (or whatever it was) fell on the reinsurance company.
Flood happens in a place where floods are uncommon, e.g. Tornado hitting Barrie, Ontario. Home insurance companies are hit with hundreds, even thousands of claims. Most are not in the eight figures, but insurance companies don’t just buy insurance against exceptional claims, they also buy insurance against single events like floods triggering unusually large numbers of claims that would otherwise fall below the deductible.
This is what reinsurance is for, so the interesting bit to me is what my client related: It seems that a statistically improbable number of people just happened to have all their furniture in the basement while they were painting their house or some such, and it all got ruined, so the insurer is on the hook for replacing furniture that wouldn’t normally be in the basement (we are not talking about people with furniture in finished basements, we are talking about people claiming they were storing furniture in their basements).
Normally they have the bandwidth to investigate such wild claims and reject most of them, but when they all come at once, the insurance company looks very bad if they tell everyone to wait a month or three while they work through a backlog of investigations. So they lay off their losses on the reinsurance ompany.
After regaling me with stories about improbable events and how much the reinsurance company had to pay, the GM of the office I dealt with told me that he owned two cottages:
One “entertaining” million-dollar cottage on a lake in Muskoka, Ontario, where one could jet-ski and power-boat.
And one “get away from it all” cottage on a different lake that had a 5km/hr speed limit, effectively barring motorized sports.
From this I deduced that for all their wild payouts, they were running a good business that could afford to pay its management quite handsomely.
See here: https://www.reuters.com/article/us-olympics-insurance/insure...
The IOC had 800 Million insurance and overall was 2-3 Billion. It would be really interesting to understand how to price an 800 Million Olymoic insurace policy
Officer: Sir, how high are you?
Dude: No officer, it’s high how are you
I am personally, barely, three sheets to the wind - I've only guzzled two bottles of red!
It was a simpler time, before autocorrect errors dominated, and it was also a fun Friday night. The somewhat regular “Adam bot” in “party mode alerts were just little bit more amusing to be woken up by late at night when things were broken.
Especially if use the same messenger app both for work and for personal use. And by "personal use" I mean sharing porn with your significant other.
https://www.sbnation.com/tennis/2020/4/8/21214031/wimbledon-...
https://www.sbnation.com/tennis/2020/4/8/21214031/wimbledon-...
> The All England Club reportedly updated its Wimbledon insurance policy years ago to include the infectious disease clause following the worldwide SARS outbreak in 2002.
Cat bonds are fascinating. What you describe is one of many structures. In essence, bank loans are to bond markets as reinsurers are to cat bonds.
I'd love to hear someone elaborate on this, as I don't understand.
There's a bit of a legal difference. And bonds are expected to be traded relatively easily, but your creditor selling your loan to someone else is not quite as common.
A re-insurer is someone who insures insurance companies. Many insurance contracts for you as an individual have you pay for the first few (thousand..) dollars of damage, and the insurance companies covers everything afterwards.
Of that liability, insurance companies cover the first few (million) dollars of damage, and often pass on the excess liability afterwards to yet another specialised company. The re-insurer.
Catastrophe bonds are a way for bond investors to take the liability that would normally go to re-insurers. Of course, in return for taking on some liability, they get paid. Just like you pay your insurance company a premium.
I've always how that worked. Like, who is the employee at the insurance company who takes that call, and how do they decide what's just too risky, when there can't be much historical data on risk?
The question that's asked is "would XYZ claim be covered under the terms of our current policy". Usually the best answer I've been able to get is "probably so". The unique challenge in the case of an intentionally planned dangerous stunt is that most such policies are intended to cover "claims of negligence related accidental liability."
If you planned to do something you knew had a high likelihood of being dangerous, that's not an "accident." Many such policies have specific limitations, stipulations and requirements to remain in force. For example, purchasing a liability insurance rider to cover a large corporate party may have limitations like limiting the number of people, stipulations like all the bartenders must have training on not serving inebriated guests and requirements such as having hired paramedics present.
When you file a large claim on such an insurance policy, they will check that you were in full compliance with all the policy requirements before paying out. Source: I know an attorney who works in a law firm specializing in policy holders suing their own insurance company when they refuse a claim. I'm sure there are good insurance companies and bad but based on the stories I've heard you definitely want to make sure you're in compliance under any policy you're substantially relying on.
Ring Insurance company rep sees caller ID: "Oh no. What have they thought up THIS time?"
I suspect that it is the underwriters, who are responsible for assessing risks and determining what constraints and requirements must be met to claim insurance. Their work can be highly mathematical and, other times, they will just look at the underwriting guidelines and say "No, we won't let you test a homemade parachute on a living human because your team are not professional parachute manufacturers with valid indemnity insurance we can mitigate our risk against."
Production companies and financiers won’t show up if the insurance company won’t
Also there is the ease of having video evidence and so many witnesses that have different goals
It's a clause that specifically excludes certain specific actions from coverage.
I'd encourage you to read your own insurance policies, they are fairly easy to understand..
1. https://www.youtube.com/playlist?list=PLJtitKU0CAeg88RBY08TZ...
That was the single time in my life I’ve ever, ever been so glad for liability insurance in my life. They covered everything. The hotel had to repaint and replace walls, servers, furniture, carpet, paintings, etc.
Always get liability insurance riders on your home/rental insurance. It’s usually only a few extra bucks a month. Totally worth it in the event something like a sink overflow fails to stop a sink from overflowing while you are asleep.
Anyway, I learned later that my little catastrophe coincided with a number of other little catastrophes which caused them to need to make a claim on their reinsurance company.
Contributory negligence would decline all coverage if the insured in any way contributed to the event.
I'm guessing the hotel filed a property damage claim with their insurance, who then sued the commenter, whose liability insurance worked things out with the hotel's insurance company.
You're right, the commenter would be covered 100%, but their insurance might have only paid out a fraction.
https://en.m.wikipedia.org/wiki/Contributory_negligence (apparently it’s a similar concept you have in comparative negligence)
I once thought all bathroom sinks had a little drain hole in the side to prevent overflows. But not all do. (in places I've lived in my area of the US)
Y’all know that post about the importance of walking and getting off your phone? I’m your altogether-normal, socialized coworker that’s in the bathtub 2:30-3:00PM doing pretty much the same thing being described there. What a place to be and think!
Sorry I can’t respond to your IM right this second, I’m thinking about the fill rate of my glorious tub, it’s failsafe features, the pothos over my head, the spider friend in the corner, and - before you get too concerned - whether these new bugs warrant further review of network architecture we’re building out.
I love the tub, and I make no apologies for it. Good morning HN, thanks for reading.
Not common at all in the US though new construction may include them in laundry rooms.
They’re actually a really smart idea and pretty much eliminates the risk of a water source leaking.
There's a lot of terms that you can physically write into a contract, but that courts won't enforce against retail customers.
Protip - renters insurance is a great deal, it's dirt cheap, only a few bucks a month.
One of my acquaintances at Uni did the same during our freshers week, no issues with IT infrastructure, but he did manage to comprehensively flood a conference room which was located below his room in the same building. They were carrying the soft furnishings out for most of the following day after the flood was discovered.
He set a new record in being summoned to the authorities for a serious dressing down before term had even properly started. Also earned himself a nickname he never escaped.
If they have to pay out on their reinsurance of your home policies the fact that you've reinsured their auto policies does not help them.
Someone has to insure their reinsurance of your home policies, don't they?
But for those without such a deep bench, they, like other commenters mentioned do a round robin sort of thing.
(I went with a bit more, because stocks are more volatile than cash.)
So there's a limit to how much they need to re-insure.
Someone already said that the rabbit hole ends with eg Berkshire Hathaway. But it also ends with eg (retail) investors who hold catastrophe bonds or shares of insurance companies.
Some whole-life policies carry cash value and are an investment vehicle as well, so you can potentially make money on them surviving as well. This seems ethically-better, but most life insurance is term life that doesn't have this investment upside.
It's just that morally we treat insurance differently; and society has developed some moral and ethical rules around this topic. But because the mathematical structures are so similar, you can guess that the moral rules have lots of grey areas.
(Similar for financial derivatives. Eg farmers use wheat futures to lock in the prices for next year's harvest today. Speculators use the same futures to 'gamble' on prices.)
The mathematics are similar from the ensurer/casino side. However:
1. The happiness impact of losing 5x your net worth (house burnt down, eternal debt) is likely much bigger than gaining it.
2. It's harder to repeat sell insurance to someone until they are broke, compared to a slot machine.
If you take bets on how companies will do in the future, it's called finance or investment services. If you take bets on human misery, it's called insurance. And if you take bets on sports, it called gambling.
Businesses in all three have, for good reasons, the reputation of being predatory.
The cost was mind-boggling, millions upon millions. It nearly bankrupt his insurance company.
In the end it's the law of large numbers, pretty much what a casino does: take lots of small positive bets, don't let one bet dominate. If you do get something too big, syndicate it with some of your competitors to spread the risk. Of course also make sure everyone who comes for insurance is actually what you think, like the guy in the article says it's not necessarily a hugely detailed check but it is enough to stop the worst frauds.
You want a model that's robust, and you only have so much data about how often some guy hits a hole in one or a half court shot, and there's only so much you can know about whether they are a pro and the distance to the hole.
The big problem seemed to be competition. You only get to write the insurance if you're the best price but the best price is not necessarily one that makes sense for the business. If some guy is buying market share with a loss leader, what do you do? Every segment of the market could be affected by this at a given time.
In that context other insurance companies can't compete unless they also are making huge returns on their float. It drives risky behavior by insurance companies in exactly the opposite way you'd prefer.
When insurance companies agree on a 'bad bet', that just means that they are essentially agreeing to pay a high interest rate on their float.
A profit driven insurance company should only agree to such an expensive float if other funding sources are also expensive. And that's independent of the risk appetite of the investing managers of the insurance company.
To be explicit: a profit driven insurance company should issue more equity or a bond to finance their investment, unless the float is cheaper for them.
(Of course, this all goes out of the window, the moment you have legal rules that restrict insurance companies from issuing more bonds or equity. Then they might rationally agree to an expensive float.)
Like most insurance, the conditions are checked before paying the winner. Of course, there is still the possibility of fraud.
That's straightforward - your insurance product needs reputation. Sure you could go with "that other guy" but we're Lloyd's! You know we'll pay out if it's a legit prize winning.
Also marketing - lowballer needs to spend to get visibility that would cut into margins. The market player that has the most data knows exactly how much to spend on marketing and how much to charge in premiums.
A friend of mine worked for an insurer, their job was to model the risks and calculate insurance costs for various things. The problem was, it didn't really matter how clever or detailed their modelling was. If their risk model came up with too large a premium, management demanded that the pricing be made more competitive. So they ended up overriding their calculations with a whole heap of 'fudge factors' to move their prices to be more in-line with the rest of the market. Kind of defeated the point of the modelling, really.
They knew where they had fudged, which meant (if management was smart) they had some clue on when a client was slipping into a risk area and the policy should be hedged.
It seems like the more predictable something is, the more the market will squeeze insurers' margins on insuring that risk.
Holes-in-one probably follow a pretty regular probability distribution, which makes me think this is probably a very tough market for smaller players, even without the loss leader thing you mentioned.
“It’s big in the Midwest,” says Gilmartin. “You divide a big field into, say, 100 squares, give each one a number, then let a cow loose. If the cow poops on a preselected number, the person wins a prize.””
I burst out laughing at this one. Can any Midwestern HNers confirm? Are people watching the cow with bated breath? Are plots closer to the gate considered better?
They had a large pen, say a quarter acre (about the size of 2 basketball courts) divided up into squares. The participants drew a number, went into the pen to find their spot. After all the participants found their spot they let the cow out to roam around. (You need a fairly docile cow to have people on the field when this happens)
In our game the cow started and did most of it's business on my mom's square, but finished on an adjoining square of young single blonde. I'll let you guess how DJ ruled who won the car. (hint: wasn't my mom)
> Are people watching the cow with bated breath?
Kinda? I mean if the prize is good it's fun to watch.
> Are plots closer to the gate considered better?
Might be worse actually. Usually they run the cows into the pen instead of letting them just mosey in. When and where the cow does its business isn't even known to the cow. The cows can take a while to go too, better part of an hour sometimes.
> 1. The number of golfers in the tournament
> 2. The length (yardage) of the contest hole
> 3. The cash value of the hole-in-one prize
> Once a client provides this information, Gilmartin plugs it into an algorithm that computes the odds, factors in his risk and margins, and spits out a dollar amount per golfer.
This seems like it could work as a simplified example of how all insurance pricing works, although with many, many more variables involved I'm sure. It'd be fascinating to look at the details of one of these algorithms.
Hopefully they know their stats modelling well enough to know that's not an actual signal.
“That may be, but as your insurance agent, I recommend getting rid of the bird to save money on your premiums.”
You still have lots of paperwork and taxes and general business overhead.
They didn't like how hard it was so someone had to fix my work. The only thing else I remember was the hole in one was for nice car and they had a witness that sat their all day, who could attest/validate if one occurred.
> 2020: Wimbledon to receive $141 million in pandemic insurance payout
> For each of the past 17 years, the All-England Lawn Tennis Club has paid for an insurance policy to guard against losses if Wimbledon should have to be canceled in the event of a worldwide pandemic. That preparation will finally pay off this year.
https://eu.usatoday.com/story/sports/tennis/2020/04/09/wimbl...
It is a common provision on the kind of insurance that come attached to a credit card, and you probably are cover for it if you own a premium card in the US or Europe. It generally come with different variation: only on registered games / all games, fix cash amount or expense of the drinks at the club, ...
A common exclusion is that you can not own a professional golf licence.
A few examples: A British Bank Travel insurance (page 33) https://assets.ctfassets.net/s0jgb0x75qln/413D8sFB4gVNoNWZXn...
Amex (page 85) https://americanexpress.com/content/dam/amex/za/network/docu...
It's a completely different thing from the insurance described in the main article.
Wild that AMEX covers it! (while on a trip booked through them though, it looks like)
Kind of funny that he ends up doing some "market research" himself. I also wonder what this is like for the employees. If you really want a good statistical average to base it off of how much time do they spend doing it? Is is "yay, we get to have recess and go do some silly activity in the middle of the day" or "come on boss, I've been throwing this ping pong ball at a watermelon for 9 hours, can I go home yet?"
Then that tells you whether someone at home who knows they're gonna be throwing pingpong balls into watermelons tomorrow, and does some practicing today, can measurably improve their chances.
So now you price the insurance differently depending on whether the challenge is announced to the contestants in advance, or if it's a surprise when they arrive at the event. How differently? You now have data for that.
Of course, they were using his fame to help sell the challenge, but I wondered what premium he got.
I'm guessing they needed to estimate the number of participants, but I don't know that either.
A unique marketing model nevertheless.
Why would anyone accept that payment schedule? Sure 25k*40 is a million, but there is a non-zero chance that the insurance company will fold in that time. Plus 25k in 40 years is worth a lot less than 25k today due to inflation.
If they advertised a million dollar prize, I win it and then they tell me it is actually 25k over 40 years I would be calling my lawyer there and then to negotiate with them.
^ see terms and conditions
This is pretty much how almost all of these things go, including the state and multi-state lottery jackpots.
You can choose your $300M Powerball payout to be paid over 30-40 years, or you can take $125M (very loose numbers) today. Most recipients choose the cash payout, even though of course the jackpot is advertised at the annuity value.
The annuity is often better for the recipient as well if their jurisdiction taxes the winnings. The recipient could be collecting winnings in their retirement when their income including the annuity would be low.
I am not an insurer, banker, or tax consultant, so don’t take my word for how to proceed should you win such a thing!
Compounding interest of doing a lump-sum now heavily outweighs the tax savings. There's also nothing that prevents you from just buying an annuity using the lump sum (I'm not a tax lawyer but I'd bet there's a way for a trust to claim the ticket to avoid paying xx% taxes on it in such a scheme).
As your link shows, when both annual payout and lump sum are taxed at the same rate (the maximum in PowerBall’s case), the NPV of the annualized payout is less than the lump sum (working backwards) or the FV of the annual payout invested conservatively and compounded is less than the FV of the lump sum invested on the same terms.
But if we’re talking about $25,000 a year for forty years versus a lump sum, it’s considerably more complicated when dealing with a sliding tax rate. $25,000 is taxed at far less of a rate than some huge lump sum, and if it’s invested and compounded yearly, the tax rate on the interest is not going to hit the max for quite a while.
Whereas if the lump sum is something like $500,000, the tax rate on the lump sum is at the max, and within a decade the interest on whatever’s left will hit the max too.
I should set up a spreadsheet. It may still be true for the 40x$25,000 example we’re discussing, but I need to run the numbers against a specific tax scale.
But, the Powerball example was 1.5B annuity or 930M lump sum so a reduction to 62%. The same thing for 1M would be 620K.
Assuming 40% of it goes to tax for the lump sum it gets reduced to 372K and fiddling around with the numbers in a spreadsheet still shows that as long as the interest is >6% you'd come out ahead even assuming 0% tax for annunity (which is the same results as the BI [1] article the previous money link was based on).
[1]: https://www.businessinsider.com/should-you-take-the-annuity-...
``` 0 25 26.75 372 398.04 1.07 1 25 55.3725 0 425.9028 1.07 2 25 85.998575 455.715996 1.07 3 25 118.7684753 487.6161157 1.07 4 25 153.8322685 521.7492438 1.07 5 25 191.3505273 558.2716909 1.07 6 25 231.4950642 597.3507092 1.07 7 25 274.4497187 639.1652589 1.07 8 25 320.411199 683.906827 1.07 9 25 369.589983 731.7803049 1.07 10 25 422.2112818 783.0049263 1.07 11 25 478.5160715 837.8152711 1.07 12 25 538.7621965 896.4623401 1.07 13 25 603.2255503 959.2147039 1.07 14 25 672.2013388 1026.359733 1.07 15 25 746.0054325 1098.204914 1.07 16 25 824.9758128 1175.079258 1.07 17 25 909.4741197 1257.334807 1.07 18 25 999.887308 1345.348243 1.07 19 25 1096.62942 1439.52262 1.07 20 25 1200.143479 1540.289203 1.07 21 25 1310.903522 1648.109448 1.07 22 25 1429.416769 1763.477109 1.07 23 25 1556.225943 1886.920507 1.07 24 25 1691.911759 2019.004942 1.07 25 25 1837.095582 2160.335288 1.07 26 25 1992.442273 2311.558758 1.07 27 25 2158.663232 2473.367871 1.07 28 25 2336.519658 2646.503622 1.07 29 25 2526.826034 2831.758876 1.07 30 25 2730.453857 3029.981997 1.07 31 25 2948.335627 3242.080737 1.07 32 25 3181.46912 3469.026389 1.07 33 25 3430.921959 3711.858236 1.07 34 25 3697.836496 3971.688312 1.07 35 25 3983.435051 4249.706494 1.07 36 25 4289.025504 4547.185949 1.07 37 25 4616.007289 4865.488965 1.07 38 25 4965.8778 5206.073193 1.07 39 25 5340.239246 5570.498316 1.07 40 25 5740.805993 5960.433198 1.07 ```
If you have an annuity, someone is probably willing to lend you money secured both by your remaining annuity and the shares or house you buy.
The difference is that one has a potential huge upside, the other prevents a potential huge downside
Just like casinos ensure their expected return is positive. So?
If yes = gambling. If no = insurance (or hedging).
It's a collection of gambling stories but has a heavy focus on bookmaking and how a lot of these operations work.
Direct link to PDF:
https://www.lasvegasadvisor.com/shop/wp-content/uploads/2017...
as an "ok" poker player (Texas hold'em being my favorite), i would host 2 table poker games with $5-$20 buy ins a couple times a month, and I'd generally win. I had clay chips, proper felt, snacks, booze, the works.
What i always found funny, though, is if you quizzed me right now about the ranks of hands i'd probably get it wrong. I don't know the odds of an inside vs an outside straight (although with a regular 4 function calculator i could work it out directly), nor do i know what the exact odds are of any hand, really. In person, most of the time, i can tell if someone's holding or bluffing. I even took my game on the road a few times to hang out with dealers from atlantic city in vegas, toured the "Indian Casinos" like Agua Caliente in California, the river boats in Louisiana. But i don't really understand the game. I just like it. So i would get cleaned out in a hurry in any "real" tournament.
I don't play poker anymore, no one to play with. I haven't been to a casino since late 2019, even though they've been open; but not because of fear of catching something. I saw a picture of what the casino nearest me had done to their craps tables (my preferred casino game when i'm not too lazy to stand up), they went fully digital! Just give me a pair of dice, not some touchscreen shenanigans.
this went long. Oops. I'm gunna find that book and read the rest of it, for sure.
https://afterdeadline.blogs.nytimes.com/2008/08/31/is-it-rip...
I don't know why I notice these things.
Then some suit wearing gold Rolex leasing an Audi S7 bundles them at his firm and goes and peddles their book to a bunch of overseas dark money. Like screw bitcoin investigations, there are billions of dirty dollars sloshing around in London, the Caribbean, Europe and I think Macau is getting in on it.
The industry should be dismantled and the profiteering white collar not-criminals-because-it’s-legal-and-they-pay-to-keep-it-that-way scum should finish their careers in labor camps to repay their debt to society as a whole. You think I’m kidding.
On that hole, the boss insisted on setting the pin himself. (Pin placement has a lot to do with the chances of a hole in one.) The boss put it where it was most likely to happen. He explained that the tournament was insured, they wanted somebody to win. The publicity would have been fantastic.
Alas, the luck wasn't there. Nobody won the big prize that year.
... it talks about what happens when a Hole in One is actually achieved, some of the weirdness that can ensue...
Only if they are bad at insurance.
$7,500 vacation: $150 / $250 (1.66 ratio)
$60k car: $865 / $1,686 (1.949 ratio)
Why would the ratio depend on the cost of the payout?
The $235 price just seems like two high a cost. I don't think the hole in one contest adds that much value to the event experience. If you are charging $80-100 per participant, and the course is already charging you $50 per player. You are eating 5 players worth of profit. These contests are always on the hardest, 170+ yard holes, so an ace is more rare than the 1 in 12.5k statistic.
It costs you 5 players $100/player - $50/player, sure. However, if you aren't insured and they make the shot, then the tournament is instantly in the red and can't even afford to pay the course fees if it pays the prize. Bankrupt, pick who loses, the course or the player. It might even be fraud, lots of things are fraud.
If the tournament is well funded and planning to be around a while, they can self-insure and eat that cost. However, a new tournament, or a non-commercial one isn't likely to have backing like that.
But in practice, there might be a dozen charity tournaments in the same region as your tournament, and if ten of them offer hole-in-one money, you might be in a race-to-the-bottom to get players to play yours and not one of the others.
That’s no different than any other competitive pressure, like whether you offer free valet parking for a restaurant. In theory, it might not pay. In practice, it might be necessary to compete.