How much will it cost to offer an AED 1,000,000 prize to your customers?
Have you ever wondered how companies can afford to give away millions of dirhams to contest winners or during in store promotions? Not all companies are able to take money out of their bottomline to cover an AED 1,000,000 prize. So how do companies cover the prize?
The answer is Prize Indemnity Insurance (or indemnification insurance). But unlike other insurances that cover you from things going wrong, prize insurance covers the client financially in the event that things actually go right. A business should be ecstatic when a customer or fan wins a contest, and prize insurance gives them the opportunity to share in their winners joy knowing that the prize value won’t come out of their own pockets.
Why should you underwrite the prize?
One of the more obvious reasons why businesses get prize insurance is for financial security. For an average company to pay for a prize of AED 200,000 or even a high-end vehicle, is unrealistic. Not every business has that kind of capital lying around. So to secure companies from essentially going in debt out of a promotion, the promoter pays a premium to an insurance company, which then reimburses the insured should a prize be given away.
The financial security is just one of the benefits of purchasing prize insurance. There is just no beating the engagement value of promoting huge prizes. And when it comes to the lack of worry it gives companies, it’s priceless. If you want the same peace of mind for your next event, you’re in luck! Now There is a company willing and able to shoulder the risk required for these events to happen – 5th Consulting!
How does Prize Indemnity Work?
According to Golf Digest, the chance of an amateur golfer shooting a hole-in-one is 12,500 to 1. Every year golfers around the world play an estimated 490 million rounds of golf, producing around 150,000 holes-in-one. For professional golfers, the odds are much better: closer to 2,500 to 1. Tiger Woods hit his earliest ace at age six, and Michelle Wie bagged hers at age 12.
Because of the rarity and prestige involved, hole-in-one promotions are a common feature in golf tournaments. A hefty prize offered to tournament competitors can be a very effective incentive to increase the number of participants. The low odds allow us to arrange a “hole in one” insurance and as a result, golf tournaments and/or sponsors can offer significant prizes to golfers during the insured round. By becoming a sponsor, you receive the benefits of advertising, signage and general brand recognition. In addition to hole-in-one insurance for golf events, prize indemnity insurance companies also offer coverages for other types of contests such as half-court shots in basketball, field-goal kicks in football, home runs in baseball, and blue-line goals in hockey.
Prize indemnity goes beyond sports and can be draw-based as well. A popular version of these promotions is known as the vault. There is a cube of clear Plexiglas with a 10 digit electronic keypad, a large viewing screen, a loudspeaker, and lights. A key-locked door on the front of the vault allows prizes to be displayed inside. These could be replica cars, stacks of bills, houses, vacation photos, etc. Prizes are usually available from AED 10,000 to AED 1,000,000. Contestants enter their personal digit number on the vault’s keypad to see if it matches the “secret code”. If the contestant is unsuccessful, the vault will sound a “sorry” response and that contestant’s turn is over. If the numbers match, lights flash, siren sounds, and the contestant is awarded the insured prize. This has been used quite successfully in getting people through the doors of newly built homes, business grand openings, and other various events!
There are two major categories of prize insurance coverage. One is based on events that are purely up to chance (or, at least, not up to the participants or beneficiaries). The other, which includes both hole-in-one contests and half-court shot challenges, is based on events that require skill.
So, how much will it cost me to insure a promotion or contest?
With 5th Consulting, offering an AED 1 million prize doesn’t need to cost you AED 1 million, or even close. 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 few details:
How much coverage is needed?
If the goal is to offer a buzz-worthy headline offer of AED 1 million, then that’s the amount to be insured.
How many people will have a chance to win?
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 if you do limit the opportunity to win the insured prize to a small number of people, you’d 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 grand prize.
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 easy enough to create interest in the promotion and also difficult enough so as to be insurable at a reasonable price. Fortunately, the team at 5th Consuting has been helping promotion creators strike this balance for years.
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. Grab headlines, build brand awareness and drive increased sales by offering the chance to win up to AED 1,000,000 … without the risk of payout with prize indemnification coverage from 5th Consulting.
If you and your business are considering running a contest to engage your customers, please give us a call today to find out how we can assist you with a Prize Indemnity Insurance policy! And as always, if you have any questions regarding this information or if we can assist you in any way, please do not hesitate to contact us! We have a variety of marketing tools that can create a significant buzz for your product, service or company brand. Let us help you advertise your business by providing you with a quotation for “prize indemnity” insurance.