Deal or No Deal

Ok, so I am hoping most of us know that gameshows like who wants to be a millionaire and deal or no deal are all insured against the big wins, so the production company doesnt get lumbered with a big bill if some contestants really hit them hard.

My question is this, if you were the insurer what price would you charge the company for each game? Assuming you were the one then making the offers, how big would your mark-up be (if the average box left was $30,000, would you offer just $20,000)? OR this the offer making process more deep than just the average box value left?

I think I remember reading one time that there was a dispute between ABC/Disney and the insurance company that they were making the questions too easy, leading to too many big prize winners.

I hate to give up this business idea, but I'll never do anything with it, so why not.

The general policy with insurance companies that insure odd-ball stuff like game shows is they calculate the expected amount they will have to pay, and then double it as a premium. In my opinion doubling the expected cost is too much and there is room in the market for somebody to undercut those prices. However, you would need a lot of money to prove you can pay in a worse case scenario, which I am nowhere close to having.

Quote: Wizard

I hate to give up this business idea, but I'll never do anything with it, so why not.

The general policy with insurance companies that insure odd-ball stuff like game shows is they calculate the expected amount they will have to pay, and then double it as a premium. In my opinion doubling the expected cost is too much and there is room in the market for somebody to undercut those prices. However, you would need a lot of money to prove you can pay in a worse case scenario, which I am nowhere close to having.

So let's assume for a moment you ARE a billionaire, what price would you put on a game of deal or no deal? I dont think the true cost of a game is actually the average of the boxes at the beginning. For that to be the case everyone would have to no deal all the way, which is not the case. Would you then deviate your offers from standard practice to entice the player into dealing to save yourself a big pay day? For example you decide the cost per game is $25k and you offer to insure the game for $50k. The player has 35k and 100k left to reveal. What would be the best offer to make? Forgive me if my numbers are different to the US version.

I want to make sure I understand the concept of insuring a game show, in this case, Deal or No Deal.

On the Primetime US version, I want to say the calculated average of all cases at the start is just over $100,000... let's round it off to keep it simple.

Offers are made that are way below the remaining cases' average, up until the last two cases. When it reaches the final two, the offer is virtually the midpoint between the two remaining values.

If I am the insurance company, and I am given the formulas used to determine offers, I can then come up with a figure I believe to be the expected amount given away each game... say it's $65,000.

Am I correct that for each game played, I would be paid twice that figure (my "fee") by the producers of Deal or No Deal, or $130,000, and would be responsible for paying all winners?

Quote: WizardofEngland

Would you then deviate your offers from standard practice to entice the player into dealing to save yourself a big pay day? For example you decide the cost per game is $25k and you offer to insure the game for $50k. The player has 35k and 100k left to reveal. What would be the best offer to make?

Is the above, marked in red, an accurate statement? Or is it up to me, the Insurer, to figure out the average payout per game? Is WizardofEngland correct, in that it's possible for Deal or No Deal producers to push their offers higher in an attempt to maximize their cost per game?

I am under the impression that in a format like DOND the insurer is the person who makes the offer, otherwise why would anyone insure it? Unless there were some strict guidelines on how to calculate the offer.

I would think the show producer would say to the insurer, heres $x for each game we play, whatever is won the insurer pays. So if its $130k fee per show and the player ends up with the 1c case, you as the insurer are in huge profit. On the other hand if the player wins the $1,000,000 your probably going to cry.

This brings in the question, how do you insure Who wants to be a millionaire? A game of somewhat 'skill'. Or a game like the UK version of "The Cube" which i would agrue is all about skill (or ability). The Cube

Quote: WizardofEngland

This brings in the question, how do you insure Who wants to be a millionaire? A game of somewhat 'skill'.

You take the statistics of how often this game has been won (fully and partially), or how often similar game shows have been won, and apply the usual formulas.
If there haven't been any similar shows before, you are in the 19th century and a hunch will be good enough.

I think taking the average of the suitcases, about 135K, is a decent estimate of the average win. Early in the game the banker offers are terrible, but nobody ever takes them. If forced, I would estimate the ratio of banker offers accepted to expected value is about 90%. Let's say that half time a banker offer is accepted. So a fair insurance price would be .5*135K + .5*.9*135K = $128,250.

I think a better question is how do they insure prizes on shows like Who Wants to be a Millionaire, which would be very dependent on how they select candidates. If I were the insurance company I would scale the premium according to how well the candidates do on a practice test.

Quote: Wizard

I think taking the average of the suitcases, about 135K, is a decent estimate of the average win. Early in the game the banker offers are terrible, but nobody ever takes them. If forced, I would estimate the ratio of banker offers accepted to expected value is about 90%. Let's say that half time a banker offer is accepted. So a fair insurance price would be .5*135K + .5*.9*135K = $128,250.

I think a better question is how do they insure prizes on shows like Who Wants to be a Millionaire, which would be very dependent on how they select candidates. If I were the insurance company I would scale the premium according to how well the candidates do on a practice test.

I had heard that Millionaire was insured only if the Contestant won more than $250K, otherwise, the network had no problem covering it as a show expense. Plus, it wasn't often that someone would risk $218K (250 minus the 32 they'd still get) to get to the $500K, so I think the insurance probably wasn't A TON.

Here's a short and sweet article that gives a rough outline of how game shows use insurance to cover all, some, or one prize offering(s):
How Game Shows Use Prize Indemnity Insurance

Getting back to the original question...
As the insurer, how much would I be paid per game of Deal or No Deal?

Let's say I am paying out prizes of over $100,000 only. Assuming the top case values are 100k, 200k, 300k, 400k, 500k, 750k, and 1 million, and there are 26 cases total, I would say $3,250,000 ÷ 26 = $125,000 plus a percentage would be fair.

However, there are two other facts that might change my fee...
1) American DoND players seem to be greedy and/or stupid. (Perhaps that is why I wasn't chosen as a contestant when I tried out...) They always seem to go one step too far. This might make my price drop.
2) DoND went crazy-go-nuts towards the end of its run, making up to 13 cases worth $1,000,000. This was known as the "Million Dollar Mission", where they wanted (needed) the ratings, so they got desperate to give away the grand prize. This would obviously make my fee skyrocket.