Thousands of readers have voted with their clicks. They really want insider perspectives on sports events and will take the time to read how insurance actuaries make sports events safer, although most people do not even know what an insurance actuary does. So I am adding a recent feature from the Los Angeles column here and adding more important information from the September 1, 2010 Business of Sports Conference in Part 2.
Most Americans were very surprised when they saw pictures and video of campus police violently attacking peaceful demonstrators with pepper spray on the campus of the University of California at Davis. Not readers of this column. On November 15, this column’s LA edition report “Penn State coaching issues raise different issues for UCLA and UC” explained a key reason for this violent incident: “Article 9 of the California State Constitution declares that the University of California is a public trust and exempts UC from oversight by government agencies except for funding decisions made by the state assembly. That’s right — what happens at the University of California stays at the University of California.”
There are tested tools for forecasting public safety problems at sports events and insurance industry experts use them frequently. Teams that have no insurance or very high deductibles have PREDICTABLY higher rates of violence and injuries than teams that require insurance. A success story makes this easier to understand. USA Swimming requires insurance with very low deductibles for all swim clubs participating in its system. This incorporates free telephone consultations on risk management so that problems do not occur in the first place.
Does this forecasting methodology work at sports contests? Yes — and — No. The basic methodology uses the same approaches that Billy Beane of the Oakland A’s made famous in the book and film “Moneyball.” But the outcome of individual sports competitions depends a lot on split second decisions made by individual athletes and coaches. These do not lend themselves to long-term forecasts, but they do make watching an athlete a lot more exciting than watching an accountant.
What is next? This is easier to predict if you can take the time to review the methodology. Regular readers of my art market columns know that I have a long history of being right in predicting steady increases in the prices for fine art. Read the latest update at this link:
I used the same methodology for reinsurance clients to correctly forecast the utility meltdown which took place at many San Diego museums in Balboa Park on July 6, 2011. Read the prescient December 2010 commentary “Alarming Security Weaknesses Challenge Museums” at this link.
The key to these forecasts is something most high school math students learn and then quickly forget. It’s called a step function. Declines in security do not take place in steady, small decreases that look like a straight line or curve. Instead, there are near simultaneous breakdowns in infrastructure that degrade components in the same time period. Why? The deficiencies are the result of bad budget decisions which cause damage that cannot be fixed with simple, quick, incremental repairs.
All teams that have a charity/fundraising arm (that is almost all major leagues teams) and all public universities are required to publish financial statements. Any well trained financial analyst can use these produce better forecasts regarding public safety at sports events locations, including campuses like UC Davis.
What is next? Good news! The same methodology shows that risk of any injury during the Team USA 2012 Olympic trials is less than when playing golf. The generous sharing of risk management expertise by the Hartford Insurance and Mutual of Omaha have made the U.S. Olympic Team an admirable example of “best practices.” What does this mean for Penn State and the University of California? These guys need to get with the program — the sooner the better.