Mass debate with Morell

[Lightning McQueen]

Shame, I'd like to hear @morell's thoughts on the Adam Goodes situation.

Do you have some kind of newsletter I could subscribe to?

Hey Digby, jo wants your phone number!!!1

[Q.]

I'm about to go mental with my ban stick!!!!!!!!!!!!!!!!!!!!!!!!!!

Careful mate, imaginary weapons are quite a threat to peoples' safety these days...

[Arch44]

He can go to the AFL thread and fight with Wedgie if he wants to do that.

It has nothing to do with SAAFL football so it stays out of here.

End of subject.

I really want to BOOOOOO this.

[Jetters]

Your points are valid to the population as a whole (in both my claims I fully expected to be shafted btw), but for footballers who are at higher risk of injury and lost income, the ledger may be a little more squarer.

Yeah it can work at that level I think, like the US System, where it's a bit like a super payment, the employer organises it at their expense and it's considered a benefit of working for (or playing for) that organisation.

Hence my comment about insurance being the new competitive paradigm for amatuer football clubs.

As an aside, Insurance can work, but IMO the profit being generated should be solely generated from the investment stream, not the premium. The premium should only ever be equal to the incurred loss - otherwise it's an inherently unfair and unbalanced business model.

Profit (P) = earned premium (ep) + investment income (ii) – incurred loss (il) – underwriting expenses (ue)

P = (ep + ii) - (il + ue)

ep = il (or at least it should be, all things being fair)

Therefore

P = ii - ue

Or, in simple terms, the profit an insurance company should be able to make, should only be equal to the money they can generate by investing the premiums of the members. Like any trust fund really.

$1 doesn't always = $1, your arguments treat humans like robots.

[Look Good In Leather]

I love people with that attitude: "but insurance is great, I don't pay a cent for my <insert medical service>". Yes. You do. You pay a monthly fee. A monthly fee which would be contractually obligated to add up to MORE than the cost of the services you used.

Take all your insurance costs, put them into an untouchable bank account for a couple of years, apply interest. Profit.

But, if a club can incur those insurance costs on your behalf*, then yeah, I think that's an attractive proposition for players.


* or maybe if the club was smart, put those insurance costs into an interest bearing account and us that instead.

Very basic understanding of insurance.
Insurance in it's simplest form is just paying someone to take on your risk, it is the level of risk that makes it more complex.

What you are saying about a club acting as an insurer would be foolish, they would be taking the gamble that they did not encounter a large number of injuries and having to pay out more than they have in their fund. This is why insurers take out re-insurance (ie they take out insurance at differing bands at a wholesale rate). There is a lot of risks involved in insurance which is why actuaries exist, I doubt a local football club would be able to build enough reserves at a rate that is cost effective.

I have a rule that I only insure my own risks, football clubs should apply the same rule. Public Liability is a club's risk, players' incomes are not.

[morell]

I meant the club would take out a policy and pay the premiums, not actually underwrite it.

[morell]

@jo172 I've posted in the Goodes thread!

It wasn't as bad as I thought it would be actually. Lots of quality posts and posters in there.

[Look Good In Leather]

I meant the club would take out a policy and pay the premiums, not actually underwrite it.

You were talking about placing the amount that would have been paid in premiums into an account and making money off the interest.

[morell]

It’s the same principle, just a higher risk and therefore a requirement for a larger amount of capital. At a practical level, I agree, it would be hard to implement for anyone but the biggest clubs.

But it would still be an exceedingly interesting exercise* to add up the premiums a club would pay to insurance companies and analyse the savings it makes when they claim.

Over time, and granted, that might be a long-ish time, I maintain the overall point that financially, that club would be better off investing that money instead.



*If we worked it through with the Mitchell Park Sporting Club - from memory our annual insurance bills are about $16k a year. That’s NOT PL or PI, that’s simple stuff I think, like building and contents etc. We have made a couple of claims for broken windows and the like, but nothing major to the best of my knowledge.

Over 4 years we might have “saved” $5k a year by having an insurance policy - this is a gut feel. Over 4 years, with a stock standard 6.25% term deposit from Bank SA, starting with the $16k worth of premiums we would earn $4.5k in interest if we didn’t touch it for a total of $21.5k, take out the $5k worth of things we would normally claim for and that’s still $11k and $3k interest for a total of $14k at the end of the year…

So with insurance, we’ve spent $16k to save $5k for a total of minus $11k. Without insurance (but with the capital) we’ve spent a total of $5k but ended up with a positive $14k balance at the end of the year.

How many years would it take until the “risk” the insurance companies are supposedly covering is completely mitigated? If we roll that $14k each year and reinvested the $16k worth of premiums again, it starts to add up very, very quickly - and this is without being too clever with other investment options - it’s just a bank account.

The problem is if you get a major disaster before your capital is mature - but my argument against that is:

This
This
This

Or, in other words, when a major disaster occurs, insurance companies don’t really want to pay for it either and will do mostly anything to get out of it, so your risk isn’t covered anyway! And therein lies the problem, any insurance business model isn't mutually beneficial. Someone is losing and when the pockets of the insurance company are naturally much deeper, they're not often on the losing side.

Might as well look after yourself IMO.

[Q.]

6.25% cash rate?

It's not 2005 buddy.

[morell]

I used the standard Bank SA Fixed Term Deposit calculator...

https://www.banksa.com.au/personal/bank ... rm-deposit

... but it's kind of a moot point - unless the rate is negative, you're still better off even if its 1%. With a lower rate it might take 10 years instead of 8 before the tipping point is reached and your risk is mitigated.

[Look Good In Leather]

The problem is if you get a major disaster before your capital is mature

How much would it cost you to rebuild the clubrooms/changerooms in the case of a fire?

[morell]

Owned by council. So it would be their problem I'd suggest. We're only responsible for the maintenance I think...

Even then, add up the Council's premiums, and the exact same argument could be made.

It's just math, man. The scale is the thing that changes. The fundamental business model behind insurance is inherently unfair.

[Lightning McQueen]

Owned by council. So it would be their problem I'd suggest. We're only responsible for the maintenance I think...

Even then, add up the Council's premiums, and the exact same argument could be made.

It's just math, man. The scale is the thing that changes. The fundamental business model behind insurance is inherently unfair.

American?

[morell]

Math is American?? We had better tell the Arabs

[Lightning McQueen]

Math is American?? We had better tell the Arabs

It was always pluralized during my schooling.

[Look Good In Leather]

Owned by council. So it would be their problem I'd suggest. We're only responsible for the maintenance I think...

Even then, add up the Council's premiums, and the exact same argument could be made.

It's just math, man. The scale is the thing that changes. The fundamental business model behind insurance is inherently unfair.

Why would you be paying Building & Contents then, surely just contents

[morell]

Sorry, I think it's just contents, yeah. I'd have to double check....

[Look Good In Leather]

Sorry, I think it's just contents, yeah. I'd have to double check....

In that case you might have a point

[Jimmy_041]

The current AFL insurance scheme for community football is self insured through a Managed Investment Scheme as a discretionary trust to do exactly as you suggest Morrell. You are obviously a pioneering man both way ahead of most, but way behind others

https://afl.jltsport.com.au/products_pi.aspx