Millions on the Line for March Madness Coaches

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With average salaries of college basketball coaches exceeding $2 million, administrators are increasingly turning to performance-based bonuses to compensate their coaches for advancing in tournaments.

Heading into the 2017/2018 season, USA Today compiled a list of coaches’ salaries from 76 universities, uncovering an average salary of $2.29 million and an average bonus north of $520,000. These coaches have an opportunity to earn, on average, an additional 22% on top of their salary based on their team’s performance.

So Close for the Seminoles

One of the most lucrative bonus structures belongs to that of Florida State head coach, Leonard Hamilton. Before losing out in the Elite 8, Hamilton earned a whopping $825,000 in bonuses for consecutive wins over Missouri, Xavier, and Gonzaga. The Seminoles’ loss to Michigan last Saturday night cost Hamilton the opportunity to earn an additional $1.25 million on top of his base salary of $2.25 million. With the potential of a near 100% increase in salary being paid out in bonuses, my guess is that Florida State University took out an insurance policy to manage that budget.

The Seminoles entered the tournament as a 9th seed, after a mediocre 23-12 regular season record. Few could have predicted this Cinderella run, including those insurance companies underwriting the policy. With an outside chance of the team advancing this far, a performance bonus contract could have been written for a fraction of the total $1.95 million potential payout.

Big Business Requires Insured Incentivization

With over $40 million in bonuses available to the 76 coaches listed, it’s big business for the colleges and big business for the insurance companies working with them. Insurance companies evaluate the odds of success for that team and use probabilities to offer big bonuses at a lower cost. 

By leveraging insurance, an organization can offer huge incentives within their budget and transfer the liability of paying out those incentives to the insurance company.

 

Dylan MacTavish

Business Development Manager at Insured Creativity.

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