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Comment by dgritsko | Hacker News Reader

> The cost to insure against a hole-in-one is dependent on 3 factors:

> 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.

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I'd love to see the weird trends they find on some of the bigger more complex algorithms. Like people who drive red cars born July 2000 with a pet bird are 8 times more likely to get in an accident if they primarily drive near Chicago or Miami. I'm sure it's not that granular but I can dream.

People who drive red cars born July 2000 with a pet bird are 8 times more likely to get in an accident if they primarily drive near Chicago or Miami

Hopefully they know their stats modelling well enough to know that's not an actual signal.

Heh. “I think you're overfitting here, no?”

“That may be, but as your insurance agent, I recommend getting rid of the bird to save money on your premiums.”

One of the things that swings the price a fair bit in the UK is your job title which has always intrigued me as a signal. I could understand if it's someone using their car for deliveries or as a race car, but I'm unsure why a "counsellor" could be paying double the premiums of a "Web developer" on standard insurance.

I've been told by an agent before that a "web developer" at a contractor/wordpress body shop-type will be less likely to take risks, while a "web developer" at FB or G would be more likely to do things like rock climb, drive into the middle of nowhere, drive faster.

Ach, there may well there be signal in there (and the insurance companies do enough stats modelling to tell if there is) - I mean, isn't the car color a well known example where the people's tendency to drive recklessly is correlated with their choice of buying a boring color or a flashy one?

Most state insurance commissions have strict rules that limit the factors which insurers are allowed to use for setting auto insurance premiums.

Hole in one probability can vary by a large factor depending on hole location and green contour. If that's all they consider, either they're heavily profitable or some tournaments could break even.

From the article, a 100 golfer tournament with a hole in one prize of $7500 costs $187 in premiums. If the hole in one probability of each golfer is 1/12500, the expected payout is only $7500/12500*100=$60, so I'm going with "hugely profitable".

I'd go with: the actual actuarial cost of the hole-in-one payout is a small part of their business.

You still have lots of paperwork and taxes and general business overhead.

Now add labor cost of a person to stand by the tee box all day and validate potential winners.

I was responsible for cutting cups the morning on one of these tournaments (long, long ago). On the par three in question, it was due to be a middle front (red) pin (we rotated a 3x3 grid). I gave it a little over a pin length off the fringe, not being generous at all, because there was a water hazard about 2 feet off the front fringe.

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.

That's exactly what I thought as well: build a golf course that's effectively a giant funnel, with the hole deep down in the bottom spot where the ball inevitably ends up. The entire thing must be large enough to have enough "yardage" to get a low insurance premium. Register that course for a nice 10m$ hole-in-one insurance. Profit!

That is of course what the 16th hole at Augusta National is (on Sunday). That pin placement has to have netted them at least $3M in ad revenue.

True. Approximate skill of the golfer could also be an important factor - the article even mentions three LPGA golfers getting holes-in-one in the same tournament. Presumably they were quite a bit more talented than your average entrant.

The article mentions in passing that pro golfers are usually excluded from the standard / cheaper insurance policies.

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