Insurance in Sports: Baseball and Action Sports

Few sports fans realize the important role that insurance plays in the modern sports world. In recent weeks, two articles on the subject have caught my eye.

The Detroit News ran a story outlining how player contract insurance works and what is does not cover. (Henning, "Costs for coverage are out of the park," Det. News, 07/24/05). As the article states, even the best insurance rarely picks up the complete cost of an injured player's contract.

- A player must be on the disabled list from 45 to 90 days of a 172-day major league season for insurance coverage to apply. Coverage generally consists of the carrier's paying 50 percent of the salary requirement, or, in some circumstances, as much as 75 percent. Rarely is a contract insured at 100 percent of its value.

- The 45- or 90-day waiting period (time disabled), and the amount of money covered by the policy, is a form of deductible, same as consumers pay for car insurance. The more deductible you absorb, the lower your payment. The longer a team waits for insurance to kick in, and the less contract money you put the insurance company at risk to absorb, the lower the club's premium.

For the Tigers (the team featured in the article), the high cost of insurance most likely means that they will not be covered for some of their injured players' guaranteed money, including reliever Troy Percival. The article has more details.

The second article, in the LA Times, discusses the tricky business of insurance for extreme-sports athletes. (Bolch, "Action-sports athletes explore union option," LA Times, 08/03/05). As would be expected, athletes participating in action and extreme sports face incredibly high insurance premiums, if they can get insurance at all. Some have even resorted to being less than 100% truthful about their profession, which is certainly not a good idea.

One solution proposed by a number of riders is to unionize and seek group insurance coverage. The Pro Riders Organization (PRO) consists of motorcross riders, skateboarders, BMX riders, and other action sports athletes. The union hopes to achieve many gains for its members, with insurance being near the top of the list. Getting insurance as a group would decrease the premiums for all of the athletes. PRO hopes to further lower the cost through a new credit- and debit-card sponsorship with MasterCard. PRO will receive a small fee from each transaction with the cards that will be used to subsidize its members premium payments.

For those interested in reading more about insurance and sports, see these earlier posts:
College players and insurance - 2/20
Golf sponsor insurance - 2/23
Jockeys and insurance - 12/1/04

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