Insuring college athletes an evolving industry
Published: Friday, August 8, 2014 at 9:00 a.m.
Last Modified: Thursday, August 7, 2014 at 9:43 p.m.
Keith Lerner's cell phone is rattling and humming as he sits in the office he refers to as “the museum.” Framed jerseys hang from the walls and signed helmets and footballs dominate the credenzas.
It's a busy time for Lerner and his son, David, the former Florida punter who joined Lerner's Total Planning Sports Services after his kicking days were over.
It's especially busy because the way college football players are being insured has changed drastically over the last two years.
“It's a new phenomenon,” Lerner said. “I've been doing this 26 years and the last 12-to-24 months there have been monumental changes in regard to this.”
Lerner underwrites coverage of many athletes who want to have insurance in case of an injury, accident or illness affects their future. It used to be that players had two options — to use the NCAA-sponsored plan or go to a private licensed underwriter such as Lerner.
The NCAA-sponsored disability insurance for “exceptional student-athletes” went into effect in 1990 for football and basketball with ice hockey and women's basketball added later. Athletes interested would finance the premium and pay it when they signed their first pro contract.
But two years ago, as the NCAA looks for ways to do more for its high-profile athletes, the member institutions discussed the possibility of the NCAA paying the insurance premiums for players. That discussion died, but a new method of payment arose from those ashes.
College athletic programs receive a payment each year that is called the “Student Assistance Fund.”
It was started in 1991 after the NCAA signed its basketball rights deal with CBS. The fund is designed to be used to help student-athletes who, for example, have a death in the family and need transportation or can't afford a suit to go to media days.
The amount of the fund varies depending on the number of athletes in a program but usually ranges from $300,000 to $400,000.
In the last two years, schools have started to realize that it can also be used to pay insurance premiums for its top athletes. Florida State is paying about $55,000 for a $10 million policy for Heisman Trophy quarterback Jameis Winston, a policy written by Lerner's company and insured by Lloyd's of London.
Texas A&M was the first school to go public with its payment of the premiums on lineman Cedric Ogbuehi.
“And you know how schools copycat,” Lerner said. “It trickles down from the power teams.”
The NCAA has a $5 million limit on complete disability, although a private insurer can go as high as Lloyd's values the player's potential. Since he has been writing the insurance, the only player Lerner has written insurance on who suffered a career-ending injury in college was Florida's defensive tackle Ed Chester, who collected $1 million after a knee injury in 1998.
But it's not just total disability that is now being insured.
“Every time I get a call from a school,” Lerner said, “it's about loss of value.”
Winston has $5 million in disability and another $5 million in loss of value. If a documented injury causes Winston's NFL draft status to plummet, he would collect on the loss of value insurance. That amount would depend on how far he slipped.
Lerner has written several loss of value policies this year, including one for Oregon quarterback Marcus Mariota. He said one player has $12.5 million in insurance with the two policies Lerner wrote.
“Loss of value was always out there, but it's just recently that players started adding it and that schools are getting involved,” Lerner said. “The whole industry is changing. Part of my job in the last year has been consulting with schools about which players they should pay for.”
Lerner said the loss of value policies began to become more prevalent after Marcus Lattimore's second knee injury in 2012. Lattimore went from a projected first-round pick to being selected in the fifth round. He didn't have loss of value insurance.
“That was a tipping-point case,” Lerner said. “He lost a lot of money.”
He believes the insurance policies could become recruiting tools for schools, not only to entice players to sign with a school that will take care of him but to re-recruit players who are thinking about leaving.
However, not every school, including the University of Florida, is buying into that theory.
Florida director of compliance Jamie McCloskey said the concern is that if you pay for several players' policy, the Student Assistance Fund would be deflated for emergencies for other student-athletes.
“It's a difference in philosophy,” McCloskey said. “You pay for a couple of players' policies, what about the other 300 athletes? What if someone needs an emergency flight because of a death in the family and the Student Assistance Fund is gone?”
Florida helps players go through the NCAA-sponsored insurance for disability and players certainly can go to a private insurance company if they are willing to pay the premiums. But McCloskey pointed to a player who did just that and then decided he didn't want to play pro football. He still had to pay the premium.
For the players who are talented enough and have schools that will pay for the premiums, it's a no-lose situation. Lerner was on a campus this week talking to several draft picks. His son signed one Monday night.
“It's gotta be first, second or third round,” Lerner said. “And you don't collect if you drop from No. 20 to No. 30. It has to be at least a round and not because you threw a bunch of interceptions.
“We send Lloyd's a bunch of NFL mock drafts and they make the determination. We're also seeing it with one-and-done basketball players as a way to show the parents the school will take care of them.”
Contact Pat Dooley at 352-374-5053 or at firstname.lastname@example.org. And follow at Twitter.com/Pat_Dooley.