Fantasy Football player insurance

[Mookie4ever]

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.

[saundman2000]

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.

Don't argue with The Dude. By reading his post I can tell that he knows economics. Whether or not to buy fantasy football player insurance is indeed an economical proposition.

[The_Dude]

The flip side could be that these idiots selling the insurance don't know what they're doing... that's a distinct possibility, but if they know anything about mathematics and economics, they will likely make a killing off risk-averse fantasy football owners.

The only way they don't make money is if more than half of the top guys in the league (guys you would actually take out insurance on), get injured...

For instance: Say, the only players that people buy insurance on are the average top 10 from this year's draft...

LT, SA, Peyton, Priest, Edge, McGahee, Culpepper (and you might quibble about the bottom part of this list)...

none of these guys have suffered season ending injuries, so if 90% of their business comes on 10 or 12 studs, the payouts on players like Walker and Ahman Green are like the flashing lights going off at the casino while these guys are pocketing vast sums of money.

Even if you take the hypothetical that LT gets injured, I can't imagine that the payout is as big as for Walker (i.e you pay a higher premium).

With 10 years back-data, you could probably construct a business model that would succeed. Factor in history of injury, some sort of value to the player, and numbers of how many top players get injured every year. It wouldn't be that hard to find your price point.