The NFL is the worlds largest grossing sport by quite a margin, according to marketwatch.com. However, the worlds biggest sport may be in trouble. And the reason you ask? Insurance.
It is terrible to think that one of our favourite sports would go away. But is that the insurance companies’ fault? Not exactly. You see, insurance companies calculate risk and assess a premium to pay out when claims occur. With the escalating injuries in the NFL, it becomes increasingly more difficult to calculate future losses. This is a problem for insurance companies as they set a price today for something that may come back to haunt them 10, 15, 20 years down the road.
What Can The Insurance Company Do?
As a result insurance companies are forced to react. They can increase their premiums to a point where they think they can offset their claims payouts but that falls back on the consumer. They can exclude certain claims or coverage, such as head trauma or neurological injuries. Again, this falls back on the consumer. Or the insurance company can pull out of the market, leaving the consumer to completely fend for themselves.
If you were an insurance company would you insure professional football?
In 2011, the NFL started facing concussion litigation and at that time there were over a dozen major carriers who served the pro football industry. As of 2018, only one carrier covers head trauma. The fate of the sport rely’s on the safety of the individuals playing it. If the game is made safer for youth growing up and the professional the insurance companies won’t disappear, but without them, the game may be in trouble.
How Does Insurance In Pro Sports Correlate To My Personal Insurance?
There are correlations to what we are seeing in the NFL to our personal insurance as well. Think about it. If the insurance companies are losing money because the premiums they set were too low in relation to the amount they are paying out in claims they will try and increase them. This hurts the consumer. They can exclude certain coverage or claims. For instance in 2016 the Ontario government reduced the amount of accident benefits coverage you can receive. Luckily you do have the option to buy that coverage back up. Or they will exclude water protection coverage for your homeowners policy if it is too close to a body of water. Finally, the insurance company may pull out of the market. At one point State Farm pulled out of the state of Florida, entirely, because they could not make a profit. Believe it or not we are seeing this right now in the commercial trucking space where insurance companies are pulling out of the market altogether because the claims and expenses are exceeding their revenue.
All of this provokes thoughts of change or disruption. Is there a better way to do this? Is there a smart 20 year old in his basement with a better idea? There has been lots of talk in the auto industry about “peer to peer” insurance. The concept is we all insure each other and get rid of the insurance companies. But, look around you on your next morning commute, or the next time you are on the 401 highway. Do you want to insure those people? I’m not sure I do. I like having insurance companies to buffer me from that risk. They insure a few million people with better data and analytics than the general public has and they spread that risk over a large group of people. I don’t like paying for insurance either, but the buffer suits me fine.
What Is The Solution?
With insurance, the solution isn’t increasing premiums or excluding coverage. The solution for home and auto insurance could be the same as what the NFL is striving to do, is making the environment safer. Better equipment, different rules, better technology. These are some of the solutions that may help the NFL create a safer product. The same can be said about the insurance for you or I. Better vehicles with built-in safety features such as automatic braking or lane correction assist, even driver less cars may be an option! The government may also play a role to protect people, creating different laws or penalties that discourage poor behaviour such as texting and driving. These are the solutions that help the insurance world no matter the product.
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