So a co-worker of mine wrote an article a little while ago on “fantasy sports insurance” Fantasy Sports Insurance. I’ve never heard of it but it’s definitely intriguing given my affinity for fantasy sports. It also looks like historically it had actually been underwritten by actual insurance companies. My questions are:
Could this seriously be considered insurance?
Would it ever get big enough that question #1 matters?
If it is technically insurance, is it a P&C product?
Who is actually suited to price this stuff: CAS or SOA members (or both)?
The guy’s not thinking about #6 correctly. Or at least, there’s an obvious answer to what he puzzles over.
The risk to the insurer is that the player gets injured, since that’s what triggers a claim payment. And yeah, lots of fantasy players will have Dalvin Cook (or insert your favorite fantasy pick here).
That doesn’t mean the insurer can’t manage the risk though. Insurers are quite used to managing highly correlated risks.
When the twin towers were hit on 9/11, a group life insurer who was covering a business located in the affected portions of either tower lost a lot of lives all at once. Healthy lives with low reserves and high amounts of insurance.
When a hurricane hits Florida, property insurers get hit with a ton of claims all at once.
When employers hand out pink slips notifying 20% of their workforce that they’re laid off and their benefits will be cut off at the end of the month, dental and vision claims will go through the roof as all of the laid off folks and their families go to the dentist / optometrist one last time before losing coverage.
So the fantasy football insurers will have a lot of risk on Dalvin Cook, and they should be aware of that and manage it… either by taking out reinsurance on him, or limiting their exposure to a level they are comfortable with.
I think both P&C and Life actuaries have the needed skills to manage both the concentration of risk and the overall product.
Ultimately, it sounds like it is 3rd party disability insurance though, and disability is technically a Life product. Depending on how the policy were written there’s probably a way to structure it as a P&C product.