Why Golfers Buy Hole In One Insurance(priceonomics.com)
priceonomics.com
Why Golfers Buy Hole In One Insurance
http://priceonomics.com/why-golfers-buy-hole-in-one-insurance/
15 comments
I have golfed since I was a kid (grew up in the mid-Atlantic), and have been a serious golfer for the last 7 years or so - having lived both in Boston and the bay area during that time.
I very rarely bet any money on my round, nor do the people I play with. True, there are people betting on their rounds, but I'd estimate it's 1 out of every 10 groups that goes out for a round that does that.
The article blows it out of proportion a little bit, too. At the courses I play (in the bay area), there are usually maybe 20 people in the clubhouse, and a round of drinks would probably come to $100. The "insurance" crowd is a very small subset of the golfing population.
True - it is an expensive sport and maybe traditionally a game for the wealthy, but my weekly golf habit doesn't cost much more than a gym membership. People from all walks of life play and enjoy the game, and it definitely doesn't have to be expensive unless you want it to be.
I very rarely bet any money on my round, nor do the people I play with. True, there are people betting on their rounds, but I'd estimate it's 1 out of every 10 groups that goes out for a round that does that.
The article blows it out of proportion a little bit, too. At the courses I play (in the bay area), there are usually maybe 20 people in the clubhouse, and a round of drinks would probably come to $100. The "insurance" crowd is a very small subset of the golfing population.
True - it is an expensive sport and maybe traditionally a game for the wealthy, but my weekly golf habit doesn't cost much more than a gym membership. People from all walks of life play and enjoy the game, and it definitely doesn't have to be expensive unless you want it to be.
"Golfing is a game for the wealthy"
Not all golfing takes place at country clubs. The District of Columbia has four public courses (three of them nine-hole). I golfed when I was a kid, and though we were comfortably off, it would be a stretch to say that we were wealthy. I've since known golfers who, again, were comfortably off and not much more.
Do those golfers put wagers on their rounds? I have no idea; we never did.
Not all golfing takes place at country clubs. The District of Columbia has four public courses (three of them nine-hole). I golfed when I was a kid, and though we were comfortably off, it would be a stretch to say that we were wealthy. I've since known golfers who, again, were comfortably off and not much more.
Do those golfers put wagers on their rounds? I have no idea; we never did.
I don't know about this. I'm pretty sure wagering in golf is against club rules. :)
Source: Caddyshack
Source: Caddyshack
Is there a case in history where rules against gambling have worked?
Really? I wouldn't expect the likelihood of winning given getting a hole in one to be much.
A hole in one is only 2 (or extremely rarely 3) under par, the spread of scores in a game would usually be far greater than that.
A hole in one is only 2 (or extremely rarely 3) under par, the spread of scores in a game would usually be far greater than that.
I disagree -- I don't think that a hole-in-one correlates with winning the round (I'd be interested if someone can crunch the stats for the PGA), and I also don't think that goes any further to explaining the reasoning.
I think the article DOES hint at explaining it anthropologically -- there's a rich tradition of "potlatch" events in which community members demonstrate their power by how much they can give away. Ultimately, you've just experienced some incredible good luck, and that gets spread around by handing out free drinks. Also, if you hang out at the club long enough, you'll be the recipient of many hole-in-one free drinks, which will ultimately balance out the round you had to buy.
I think the article DOES hint at explaining it anthropologically -- there's a rich tradition of "potlatch" events in which community members demonstrate their power by how much they can give away. Ultimately, you've just experienced some incredible good luck, and that gets spread around by handing out free drinks. Also, if you hang out at the club long enough, you'll be the recipient of many hole-in-one free drinks, which will ultimately balance out the round you had to buy.
Agree. A hole in one is usually achieved on a par three green which requires no real skill to hit (but plenty of skill to rarely miss) and subtracts no more than two from your overall round which is not a huge advantage in a tournament with players of mixed abilities. In a tournament the pin might well be placed in an awkward part of the green intended to deter golfers from intentionally aiming directly at it, leaving the more accurate and strategic golfers most likely to win the tournament actually less likely to score a hole in one. If anything, a hole-in-one represents the opportunity for people without any chance of ever achieving the consistency to win a golf tournament to earn bragging rights.
Anecdata: As one of the most erratic, temperamental and limited golfers ever in my teens, I once nailed an approach shot from 150 yards straight into the hole on the second hole (arguably, given that I was playing my second shot from heavy rough, a more difficult shot than a hole-in-one on a regular par three). In the same round I then managed to lose five balls in the process of scoring seventeen on the 17th during the same round. To be fair, it was quite a difficult 17th. Strangely, I haven't played much since.
Anecdata: As one of the most erratic, temperamental and limited golfers ever in my teens, I once nailed an approach shot from 150 yards straight into the hole on the second hole (arguably, given that I was playing my second shot from heavy rough, a more difficult shot than a hole-in-one on a regular par three). In the same round I then managed to lose five balls in the process of scoring seventeen on the 17th during the same round. To be fair, it was quite a difficult 17th. Strangely, I haven't played much since.
I am (was - haven't played in ages) a truly terrible golfer, and I've gotten a hole in one. I don't remember EVER winning a round.
Funny story - when I got the hole in one, my foursome spent 5 minutes or so looking behind the green for my ball before someone looked in the cup and asked, incredulously, if I was playing a Titleist.
Funny story - when I got the hole in one, my foursome spent 5 minutes or so looking behind the green for my ball before someone looked in the cup and asked, incredulously, if I was playing a Titleist.
This tradition also goes down to a round of golf with friends, where there's no money on the line at all. Also, while golf started out as a game for the wealthy, there are quite a few teachers, etc who golf now too. Finally, a membership to the local country club could be someone's big monthly splurge; instead of lots of cable channels, etc, they just have a golf membership so they can go do something they enjoy without worrying about it. Golfing simply isn't as hoity-toity as it used to be.
Golfing is a game for the wealthy
Tell that to my $20 set of clubs and $5 bucket of range balls.
Tell that to my $20 set of clubs and $5 bucket of range balls.
A lot of the comments here seem to assume that only the rich play golf. I'm from a golfing family (don't play myself) and that is definitely not always the case, at least in New Zealand. Sure you'd get doctors and lawyers playing but the bulk of the club would be middle class people making well under the equivalent $100k. Certainly not people who can afford to drop say $1000 casually.
For instance my local club ( http://www.akaranagolf.co.nz/akarana_join.php in the middle of Auckland ) charges $1875/year ( $NZ but close enough to $US) for a full member while the club I used to play at ( http://taierigolf.co.nz/?page_id=49#membership a bit out of a smaller city ) charges $650/year. You could play all year for just that amount.
I just asked my relatives what the rule is at their club (which is fairly nice/expensive as clubs go) and they said "In the old days the club would shout the bar, at our club new the club pays $150 and you pay the rest. So normally people wait till few have left before buying". So just a single round of drinks. I've found similar bits in the rules of other clubs
For instance my local club ( http://www.akaranagolf.co.nz/akarana_join.php in the middle of Auckland ) charges $1875/year ( $NZ but close enough to $US) for a full member while the club I used to play at ( http://taierigolf.co.nz/?page_id=49#membership a bit out of a smaller city ) charges $650/year. You could play all year for just that amount.
I just asked my relatives what the rule is at their club (which is fairly nice/expensive as clubs go) and they said "In the old days the club would shout the bar, at our club new the club pays $150 and you pay the rest. So normally people wait till few have left before buying". So just a single round of drinks. I've found similar bits in the rules of other clubs
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Am I to understand that someone who is golfing is unable to absorb the costs of several hundred dollars of drinks in?
And that this is common enough that there's an insurance product to hedge that miniscule risk?
It seems like a much shorter article could have been written: Because they can't do math.
And that this is common enough that there's an insurance product to hedge that miniscule risk?
It seems like a much shorter article could have been written: Because they can't do math.
Perhaps for the American case of buying a few dozen martinis, but what about the anecdote of a Japanese man taking 200 guests on a dinner cruise? With a premium of $3, per the article, that might not be a bad idea.
The article gives a "typical cost" of $3-5000 for a Japanese person keen to show their generosity. It doesn't make it clear the policy will pay out anywhere near that much (the British policy we are given a direct link to covers a lot more than holes in one, but pays a maximum of £200 on alcohol only for holes-in-one, at an overall premium cost of £49.95 per annum)
Even if the $3 premium really is a one off fee which covers $3000 worth of celebratory cruises (both of which I doubt), an amateur golfer with a 1 in 12,500 chance of getting a hole in one and enough disposable income to join the sort of golf club that expects celebratory cruises probably shouldn't bother.
Even if the $3 premium really is a one off fee which covers $3000 worth of celebratory cruises (both of which I doubt), an amateur golfer with a 1 in 12,500 chance of getting a hole in one and enough disposable income to join the sort of golf club that expects celebratory cruises probably shouldn't bother.
My understanding of the article, in the Japanese case, is not that the club requires or expects this sort of thing. This is a cruise for the "lucky" golfers friends and family and is more a societal expectation for whatever reason.
Just because you play golf, does not mean you wouldn't miss several hundred dollars. Golf is not really a poor man's sport, but neither is it polo.
I can't shake this image of someone holding a $5 Starbucks in one hand, paying a $3 insurance premium to cover a less than 1 in 10K chance of losing $500 and complaining that they can't "afford to risk the $500".
Let's see: you just paid $3 to hedge a risk with less than a nickel's worth of -EV and you're holding your daily Starbucks. I'm beginning to understand why you can't afford the risk...
Yes, yes. I know I'd be erecting a strawman if the coffee was central to my argument. I don't think it is; I'm just trying to share my mental frame.
Let's see: you just paid $3 to hedge a risk with less than a nickel's worth of -EV and you're holding your daily Starbucks. I'm beginning to understand why you can't afford the risk...
Yes, yes. I know I'd be erecting a strawman if the coffee was central to my argument. I don't think it is; I'm just trying to share my mental frame.
Ah, but this is why insurance works- if you don't have a spare $500, the pain of a $500 payout is greater than $500. That's why, even though the liability multiplied by the probability is less than the premium, it can still make sense.
Do you have car and home insurance? All insurance has negative average payout.
Since you asked:
I have liability-only car insurance (and high limits at that) but not collision/comprehensive, as I can readily write a check for a replacement car. (My car is worth about $5K; my wife's car about $7K.)
I have home insurance as I'm required by my mortgage to have it, but also because losing the house would be lifestyle-changing.
I don't insure risks that wouldn't be lifestyle-changing (unless legally mandated). I'd wager that $650 for a round of drinks isn't lifestyle changing for most golfers.
This insurance makes extended warranty plans for electronics a positively great deal in comparison...
I have liability-only car insurance (and high limits at that) but not collision/comprehensive, as I can readily write a check for a replacement car. (My car is worth about $5K; my wife's car about $7K.)
I have home insurance as I'm required by my mortgage to have it, but also because losing the house would be lifestyle-changing.
I don't insure risks that wouldn't be lifestyle-changing (unless legally mandated). I'd wager that $650 for a round of drinks isn't lifestyle changing for most golfers.
This insurance makes extended warranty plans for electronics a positively great deal in comparison...
I suspect that it more a social than a financial issue. Maybe getting that insurance acts as some sort of status signal, showing commitment towards honoring the tradition even if the occasion will most likely never arise.
hole in one insurance is usually just charged by the club in addition to membership fee, not by an actual insurance company. its also inaccurate to assume that anyone who plays golf can afford $500+ in alcohol.
> its also inaccurate to assume that anyone who plays golf can afford $500+ in alcohol.
One would hope then that upon getting a hole in one they would not spend $500 that they cannot afford. It's not a requirement to buy anyone else a drink.
One would hope then that upon getting a hole in one they would not spend $500 that they cannot afford. It's not a requirement to buy anyone else a drink.
Its probably club policy - when you become a member you sign a contract agreeing to whatever it costs to be a member, plus either hole in one insurance or the promise to purchase drinks for everyone there that day.
That part of why the insurance is unusual - It's basically insurance against a specific kind of social embarrassment.
I have been around professional golf my whole life and have seen many hole in ones. No one ever purchased me a drink. I have made a few hole in ones, and no one has ever even asked me to buy them one.
I have heard of this "tradition", but after travelling week to week with the PGA tour for years and playing golf with a multitude of new people every week, and have never even heard of someone buying more than three drinks for their playing partners.
I have heard of this "tradition", but after travelling week to week with the PGA tour for years and playing golf with a multitude of new people every week, and have never even heard of someone buying more than three drinks for their playing partners.
Well, perhaps a hole in one is a bigger deal for amateurs, so they are more likely to honour the tradition. The article give the odds of getting a hole in one as 7,500 to 1 for a pro and 12,500 for an amateur, which doesn't seem like a huge difference, but presumably pros will play so much more they'll get many more holes in one.
I worked in reinsurance, and there was the (apocryphal) story one year of how the government of South Africa had promised a million dollars to every player if their team won the world cup. On the flip side, the government looked for a reinsurer to insure them for that risk. My company said no because so basically it distilled down to sports betting and we did not have any experience in that market.
It is (or was?) also fairly normal for British snooker and darts players to place an 'insurance bet', by betting on themselves losing a game (http://www.dailystar.co.uk/news/latest-news/144899/Steve-Dav...)
Say that the difference between winning and losing a final is £50k, and the bookmakers pay out even on a bet that you lose. If you bet £20k on you losing, you change a "nothing if I lose, £50k if I win" game into a "£20k if I lose, £30k if I win" game.
Some players prefer such a game. Placing that bet might even increase their chance of winning, as part of the stress gets removed from the game (you're playing for £10k, not for £50k)
Say that the difference between winning and losing a final is £50k, and the bookmakers pay out even on a bet that you lose. If you bet £20k on you losing, you change a "nothing if I lose, £50k if I win" game into a "£20k if I lose, £30k if I win" game.
Some players prefer such a game. Placing that bet might even increase their chance of winning, as part of the stress gets removed from the game (you're playing for £10k, not for £50k)
You're usually not allowed to bat on yourself for fairly obvious reasons.
On a related note, a friend who's a sports better always placed the biggest bets against his own teams. Partly because he trusts his judgement better when not clouded by the hope that his team will win, partly because if he looses the bet, hey, his favorite team just won the game against the odds!
On a related note, a friend who's a sports better always placed the biggest bets against his own teams. Partly because he trusts his judgement better when not clouded by the hope that his team will win, partly because if he looses the bet, hey, his favorite team just won the game against the odds!
Surely betting on yourself to win is fine?
Whattt? Golfers who get a hole in one are expected to buy everyone drinks? I caddied during the summer months in high-school and college. Whenever someone got a hole in one there would be a 2-4 hour open bar after that round came in, for all of the members and their guests who happen to show up at the bar during that time. This is not the tradition around the world?!
This looks more like a gimmick to cash in on overconfident people, who want to have some extra bragging rights on the course, than an insurance. Who gets insured for something that costs you $650 at max and is totally avoidable?
$3/mo is a flat, fixed fee that can be budgeted against. $650 out of the blue is a lot like having a car break down, and is enough to put a crimp in any other plans one may have coming up. If someone really enjoys golf, it seems like a reasonable thing to do.
Except instead of your car breaking down it's like $650 out of the blue to wash all your neighbor's cars out of the kindness of your own heart. It's a completely avoidable cost (no insurance needed, just don't buy people drinks if you don't want to).
That isn't $3/mo, according to the link, it is a $3 instant one-time premium. I'm assuming it covers one day, game, or something similar.
First World Problems: The Article.
There was just someone ranting on Twitter yesterday about Bill O'Reilly's ranting of how few millennials actually play golf - "Why Is The Generation We Sunk Into Crushing Unemployment and Debt Not Playing Our Shitty, Classist Sport?"
There was just someone ranting on Twitter yesterday about Bill O'Reilly's ranting of how few millennials actually play golf - "Why Is The Generation We Sunk Into Crushing Unemployment and Debt Not Playing Our Shitty, Classist Sport?"
I think the key here is that the hole in one insurance is 'frequently bundled with other services'. It's something that basically costs nothing for the insurance companies to provide, but could act as a selling point for the right customer.
I mean, it's not pick-up basketball, but golf doesn't have to be an expensive sport. My first set of clubs were used, maybe $50. I'm not so sure, because it was 20 years ago and my father bought them for me. We were not rich by any means. We would play once a week together.
What happens when someone gets a hole-in-one and then doesn't buy anyone anything? Are they kicked out? Are they shunned? Seems like an easy solution: don't do things for people when you get a hole-in-one.
I totally thought this was going to try and make a broader analogy. But no, just a golf article. Hm.
The premise seems false. The insurance is against the cost, as is usual.
If it's a larger event, the purse for winning easily covers the hole-in-one celebrations. On top of this, if you are a member of a local country club - you're already paying hundreds if not thousands a month on membership dues. You're expected to have such wealth that to cover drinks/food isn't a big deal. Some clubs are structured such that you aren't directly paying for the celebrations, but your membership dues are such that it includes the cost of any potential celebrations.
Golfing is a game for the wealthy, including the traditions surrounding it.