October 4, 2011

Actuarial baseball

Been off the grid for a while...

A couple of weeks ago, Josh Hamilton of the Rangers hit a grand slam that got an above-average amount of attention, since it was tied into a promotion being run by a flooring company.  The title of this article describing the homer could instead be "Josh Hamilton's grand slam yields big insurance payout":
http://espn.go.com/dallas/mlb/story/_/id/6971469/texas-rangers-josh-hamilton-slam-triggers-free-flooring-payout

Somebody, somewhere, in some insurance company, sold coverage for this promotion.  And that same somebody (we hope) must have sat down and calculated the probability of Hamilton hitting a grand slam over a one month period, and set the premium based on that probability.

Summary:  insurance is gambling.

-30-

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