Three Ways to Offer a $1 Million Prize for a Whole Lot Less
By Jack Woodbury
“I want to offer a $1 million prize. How much will it cost me to insure it?”
At Prize and Promotion Insurance, we get asked this on a regular basis, but it is one of those inquiries that we never get tired of hearing. Mainly, we like the question because it begins a conversation that often leaves our customers happily surprised.
While the short answer to the question is “it depends,” let’s take a minute to dive in a little deeper.
The cost of prize indemnity insurance essentially comes down to a number of variables. So after a customer approaches us about insuring a large prize, we can start to save them money once we know these three things:
1. How much coverage do you need? (and how will you structure the payout?)
If the goal is to offer the attention-grabbing sum of $1 million, then that’s the answer. Many promotions, however, offer a $1 million prize paid over 20, 25 or even 40 years. Most of our customers don’t realize that offering a $1 million prize in this way reduces the amount you need to insure and can save them a lot on the cost of insurance.
2. How many people will have a chance to win?
Here’s another way you can really save some money. If the intent is to offer a large number of people the opportunity to win the insured prize, then risk of the prize being won is obviously much higher (and the insurance will be more expensive).
On the other hand, if the chance to win is limited to just one or maybe a few people (for instance a randomly chosen contestant wins if their entry happens to match the final score of the championship game), the risk is more limited and the cost of insurance will be considerably less.
But keep in mind that if you do limit the opportunity to win the insured prize to a small number of people, you’ll want to make sure you build in a good number of lower level, uninsured prizes that let consumers feel like they have a good chance at winning something even if it is not the chance at the insured prize.
3. What does someone need to do to win?
The way a promotion is structured is critical to our ability to judge the likelihood of a winner. If a person has to correctly guess an eight-digit number, the probability that the prize will be awarded is fairly low. On the other hand, if the contestant simply has to make a basketball free throw in order to win the prize, then the chances are much higher.
The challenge is to create a structure that is believable enough to create interest in the promotion and also difficult enough so as to be insurable at a reasonable price. Fortunately, PPI has been helping promotion creators strike this balance for decades.
Offering a $1 million prize doesn’t need to cost you $1 million, or even close.
Offering a $1 million prize doesn’t need to cost you $1 million, or even close. Along with these three basic questions, we can employ a host of other strategies to create prize promotions that generate excitement and buzz at a rate that usually puts a smile on the face of the customer.
And if, during our conversation, it seems like we’ve done this a few times before, it’s because we have. At PPI, our underwriters have decades of experience helping marketers create exciting insured promotions. If you’re interested in learning more strategies for insuring a large cash prize or another big-ticket promotion, feel free to reach out to me. I’d be happy to help you too.
Offer fantasy sports fans a chance at a $1M to $10M prize. Sound expensive? It doesn’t have to be, as long as it is insured.
Successful promotions sometimes come with a downside. Miscalculate response rates, and fulfillment costs will put you in the hole. Over redemption insurance covers you for this risk.
The Kentucky Derby is known as the most exciting two minutes in sports. The Derby and other high-profile racing events can form the basis of some exciting insured promotions.
The most common college basketball tournament promotion is to offer an insured mega prize to anyone who can pick the perfect bracket, but we offer some other, more interesting promotions.