Fast Focus
	Advances in technology and the growing popularity of contests help underwriters learn the contours of hole-in-one and other prize coverage.
	The Internet is home to more and more promotions each year, made possible by insurance to cover major prizes.
	Hole-in-one insurance is relatively new, originating in the 1970s.

Odd Ball

Odd Ball

By  Becky Squires

When the final World Series game was played last October, you can bet that 30,000 Boston Red Sox fans were celebrating more than the team’s second Series win in three years. These 30,000 had all taken advantage of a very special “Monster Promotion” launched by Jordan’s Furniture six weeks before the baseball season began: Should the Red Sox win the Series, the company promised, everybody who’d bought a mattress, dining table, sofa or bed in that time would get their purchase price refunded.

Although Jordan’s (which is owned by Berkshire Hathaway) won’t say how much money it returned to these lucky customers, anyone who has been furniture shopping recently knows that most new mattresses, dining tables, sofas and beds cost $1,000 or more apiece. (At Jordan’s, mattress costs range from $199 for a twin inner-spring to $6,600 for a king size, top-of-the-line Tempur-Pedic.) So Jordan’s Red Sox promotion could have cost it $30 million.

Fortunately, Jordan’s took out an insurance policy to cover any payout due. This kind of policy, known as “prize indemnification” and “hole-in-one insurance,” basically transfers the risk from the promotion’s sponsor to the event insurer.

Jordan won’t name the insurer. Berkshire Hathaway owns two subsidiaries that offer prize indemnification coverage, Gateway Underwriters, which is a wholesale insurance agency, and National Indemnity Co., an insurer. A Gateway spokesperson says they had nothing to do with Jordan’s promotion, and a National Indemnity spokesperson wouldn’t comment one way or the other.

Before baseball season began last year, Las Vegas bookmakers gave the Red Sox a 7-to-1 chance to go all the way (the Yankees were 4-to-1). These odds are much lower than those most hole-in-one-event companies cover: The odds of an average golfer hitting an ace are more like 12,0000-to-1. [See “Hole in One Hit Parade.”]

Although Las Vegas has lowered its 2008 pre-season odds to 4-to-1 for the Red Sox to win the Series, Jordan’s is running the promotion again. Public relations director Heather Copelas says, “We were thrilled with the results—not only from a business perspective, but also with our association with the best team in baseball. Jordan’s and the Red Sox go back a long way, and it was a win-win for everyone,” she says.

As insurance products go, hole-in-one coverage is fairly new. In the late 1970s, John Everhart, who owned an insurance firm in Dallas, wanted his local country club’s annual golf tournament to get more visibility—and thus more participants, sponsors and funding. Offering tournament players a big prize for acing a Par 3 hole would do the job nicely, but what if someone actually defied the 12,000-to-1 odds and made one? Then the club or its members would have to pay, and Everhart didn’t want to chance bankrupting either. Instead, he called Lloyd’s of London and asked if it would insure against the risk. Yes, but the coverage was expensive.

Everhart heard opportunity knocking and kicked open the door. Why not set up a company to be the intermediary between insurance companies and organizations that wanted to offer big prizes but couldn’t afford huge losses if someone actually won? And who would know how to do this better than an insurance broker like himself?

In 1981, Everhart formed the National Hole-in-One Association and persuaded insurance wholesale brokerage Swett & Crawford—already known for its innovative insurance for niche businesses—to underwrite the hole-in-one insurance. The boom began.

Today, the National Hole-in-One Association has 40 employees at its Richardson, Texas, headquarters and two more in London. Doug Burkert, its president, oversees more than 15,000 events a year for organizations that run the gamut from Fortune 500 companies to local charities. The company has paid out more than $50 million in claims at 300,000 events. “We’ve had some years that were pretty close, but, at the end of the day, we’ve always managed to make our underwriters happy. We’ve been working with Republic Insurance Group for more than 20 years now, and they get that we know what we are doing,” Burkert says.

Naturally, other hole-in-one companies soon arrived on the scene. SCA Promotions in Dallas has paid more than $155 million in cash and prizes since it was founded in 1986. U.S. Hole in One (Insurance) in Bryn Mawr, Pa., and Hole-in-One International in Reno, Nev., have awarded $24 million and $22 million in prizes respectively since each was founded in 1991. American Hole’n One in Buford, Ga., founded by golf tournament marketers in 1986, provides insurance for all General Motors’ hole-in-one events. A group of actuaries founded Hole-in-Won in Hoboken, N.J., in 1986. Indiana’s CGA says it has paid out “millions” since it was started in 1992.