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Is it possible/ has a player ever taken out an insurance policy against performance?

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04-20-2017, 04:07 PM
  #1
broad
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Is it possible/ has a player ever taken out an insurance policy against performance?

Say you are a 1st overall pick in 2020. You want to secure your family's financial future. You know you will make at least your ELC but what if you flop?[M] Could you ask an insurance company to insure your NHL career against under-performance?[M] Such as, if I don't get paid x dollars during my NHL career, I get paid y dollars from you, the insurance company.

I'm sure the premiums would be through the roof but it would guarantee that you would have a comfortable retirement regardless of how your career goes.

Would any insurance company make this a thing? Would any player hedge against his own career like that?


Last edited by BattleBorn: 04-20-2017 at 04:23 PM. Reason: BoHed it up a little.
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04-20-2017, 06:13 PM
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mouser
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You can insure just about anything for the right premium. I can't imagine the premiums would be affordable for a player on an ELC. A 1st overall player signing his ELC is only guaranteed to make about $500k total over the three year ELC. What do you think the premiums would be to insure a career that could be worth tens of millions?

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04-20-2017, 06:22 PM
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Doctor No
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Agreed - insurance typically works best for low-frequency, high-severity events.

In this case, the severity (income lost) could certainly be high, but the odds of a player not reaching some arbitrary level of potential are probably too high to make the premium useful.

You also have adverse selection, asymmetrical information and misaligned incentive issues here - the people most likely to purchase such a policy would be those who think that they'd need it. Then, once a policy was in force, it would be easier for a player to just mail it in or not work as hard.

Yes, it could be priced. Likely not at a premium that would be found to be useful.

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04-20-2017, 06:51 PM
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Quote:
Originally Posted by mouser View Post
You can insure just about anything for the right premium. I can't imagine the premiums would be affordable for a player on an ELC. A 1st overall player signing his ELC is only guaranteed to make about $500k total over the three year ELC. What do you think the premiums would be to insure a career that could be worth tens of millions?
Isnt the base 800k alone? Unless you meant taxes but they should still get alot more than 500k total

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04-20-2017, 07:20 PM
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Quote:
Originally Posted by CokenoPepsi View Post
Isnt the base 800k alone? Unless you meant taxes but they should still get alot more than 500k total
I meant the player is only guaranteed a $92.5k signing bonus and $70k AHL/minor league salary each season. That's $487.5k over three years.

Yes, if the player is in the NHL they'll get the larger $832.5k NHL base salary, but the contract doesn't guarantee the player an NHL roster spot. It's a 2-way contract.


Last edited by mouser: 04-20-2017 at 07:26 PM.
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04-20-2017, 10:09 PM
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What's to prevent a player from tanking, collecting on the policy, and then 'rediscovering' himself and still making millions in he NHL? My understanding is once the policy is paid out they can't go back and force you to give the money back unless there was proven fraud or something.

Sort of like an NHL version of Josh Hamilton

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04-20-2017, 10:18 PM
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mouser
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Quote:
Originally Posted by FissionFire View Post
What's to prevent a player from tanking, collecting on the policy, and then 'rediscovering' himself and still making millions in he NHL? My understanding is once the policy is paid out they can't go back and force you to give the money back unless there was proven fraud or something.

Sort of like an NHL version of Josh Hamilton
Typically there are conditions on the insurance policy that prevent that. If you want an interesting read, google up Bryan Berard's eye injury and how the insurance situation played out.

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04-20-2017, 11:08 PM
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Jeffrey93
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I can't imagine a performance based insurance could exist...since you control the performance. Most things you insure are out of your control and just happen.

The premiums would make failure undesirable and success barely worth it.

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04-21-2017, 09:44 AM
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Guardian17
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If anything, this option should me made available to the teams.

Better yet, get rid of guaranteed contracts like the NFL.

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04-21-2017, 10:41 AM
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Doctor No
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Quote:
Originally Posted by FissionFire View Post
My understanding is once the policy is paid out they can't go back and force you to give the money back unless there was proven fraud or something.
Since this doesn't exist, there's no understanding to be had.

If this were actually created, yes, there would be issues that would need to be taken care of. This is one of them (but can easily be handled with a "if you sign a contract above this threshold over the next X years, then the payments must be returned" clause).

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04-21-2017, 08:01 PM
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john03
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Quote:
Originally Posted by broad View Post
Say you are a 1st overall pick in 2020. You want to secure your family's financial future. You know you will make at least your ELC but what if you flop?[M] Could you ask an insurance company to insure your NHL career against under-performance?[M] Such as, if I don't get paid x dollars during my NHL career, I get paid y dollars from you, the insurance company.

I'm sure the premiums would be through the roof but it would guarantee that you would have a comfortable retirement regardless of how your career goes.

Would any insurance company make this a thing? Would any player hedge against his own career like that?
Would never happen.. so many issues that it just wouldn't ever happen... even from the NHL, it has potential salary cap circumvention written all over it..

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04-21-2017, 08:26 PM
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LeHab
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Some NFL players got insurance against falling too far in the draft, these I believe are related to injuries:

Quote:
Ifo Ekpre-Olomu set to collect on $3 million insurance policy

CHICAGO -- Of all the NFL draft prospects who went to bed unchosen Friday night after the third round of the draft, Ifo Ekpre-Olomu had to have slept the best.

A former Oregon cornerback once considered a potential first-round pick, Ekpre-Olomu ended up being taken in the seventh round (No. 241 overall) by the Cleveland Browns, but a $3 million insurance policy protecting him from slipping in the draft triggered when the last compensatory pick of the third round -- the Cincinnati Bengals choice of TCU linebacker Paul Dawson -- was made with Ekpre-Olomu's name yet to be called.

According to ESPN.com, the insurance company, International Specialty Insurance, projected Ekpre-Olomu as the No. 12 overall pick of the first round at the time the policy was signed. Subsequently, Ekpre-Olomu's senior year ended when he tore knee ligaments during the Ducks' preparations for the postseason. According to the report, Ekpre-Olomu's policy was already triggered to pay a partial claim when he fell out of the first round, and now will pay out the full amount.

Under an NCAA provision that allows colleges to pay insurance premiums for loss-of-value insurance, Oregon covered the premium of about $40,000 for Ekpre-Olomu, according to the report
http://www.nfl.com/news/story/0ap300...surance-policy

You can also read more about the loss of value policies here: https://www.si.com/college-football/...ng-more-common


Last edited by LeHab: 04-21-2017 at 08:31 PM.
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