Policy allowing an organizer to offer a high-value prize by transferring the risk of its payment to an insurer if the prize is actually won.
Prize indemnity insurance is a policy by which an organizer (promoter, company, sports club) promises a high-value prize to a participant and transfers to the insurer the risk of actually having to pay that prize if the winning conditions are met. The principle is straightforward: the insurer assesses the statistical probability of the prize being won and calculates a premium accordingly. If the prize is won, the insurer pays the promised amount to the promoter, who uses it to award the prize to the winner. Hole-in-one insurance is the most emblematic example: a golf tournament organizer promises a luxury car or a substantial sum to any player achieving a hole-in-one, then takes out a policy with a specialist insurer to cover this risk. Similar products exist for large-prize tombolas (e.g. a first prize of one million euros), penalty shoot-outs (if all takers score, the promoter must pay a large sum), or televised game shows with large prizes. Actuarial assessment is fundamental: for a hole-in-one on a par-3 of 150 meters in an amateur tournament, the probability is approximately 1 in 12,500. The market is a niche, concentrated mainly among Lloyd's specialists and some US insurers.
An automobile manufacturer runs a promotional campaign: any buyer who makes a hole-in-one during their test-drive golf day wins an electric vehicle worth 65,000 euros. 2,000 customers participate. The prize indemnity insurer calculates a probability of 16 percent (approximately 320 participants have a sufficient level) and charges a premium of 12,000 euros. Two holes-in-one are made: the insurer pays 130,000 euros.
prize indemnity, assurance prix promotionnel, hole-in-one insurance, tombola