The_Dude wrote:Mookie4ever wrote:If the math doesn't work out then don't do it. But it's possible that it might work out. This is called hedging your bets. It's not just a betting concept but it works in business too. It's not usually smart to put all of your eggs in one basket so if you are heavily into one thing buying "insurance" of one type or another may protect you from being disasterously wrong.
What you're talking about is risk aversion, which you have to pay for... I'm talking about expected value in expected utility theory. You might make money here, but that's only if you're lucky. If they're calculating their insurance rates correctly, this company is making a killing (if they have any business).
This is not the same thing. They can't calculate their rates and adjust them based upon payouts like auto insurance companies do b/c they probably don't have the business to do that. They also cannot work like a sportsbook and move their lines or underwrite with another book (b/c there is nobody taking bets that LT gets hurt).
In this business people are not buying insurance on Daniel Graham or JP Losman. The money will all be on LT or SA. Guys that are in auction leagues and blow it all on one guy and buy insurance so that everything is not lost if LT blows out his knee.
These guys are betting that the 2 or 3 main stars stay healthy. If one of them goes down then they have a major problem and you may not find them to collect on your insurance policy b/c I agree with you that they probably don't have any business. I just don't see how they can make this work.