Prize indemnity insurance, better known as hole-in-one insurance, allows promoters to offer such high prizes. The promoter pays the insurance company a premium, which may vary depending on the odds that a contestant could win the game. The lower the odds of winning, the lower the premium. If a contestant does win, the insurance company pays out the policy. If not, the company gains the premium. These policies are used in hole-in-one golf contests, game shows, and sporting events. The policy recently made headlines when a Texas prize indemnification firm requested restitution for payouts for Lance Armstrong's Tour De France wins in light of the athlete's doping scandal.
In its basic form, prize indemnity insurance is a great marketing tool. Seeing the media attention Mr. Buffett is receiving shows exactly how fantastic this tool can be for businesses. Stop by the office to talk to us about a policy. Good luck in filling out your bracket.