Insurance: The issue high-profile athletes need to consider in NIL Era

Rewind the clock to the pre-NIL world: If a well-known college quarterback rear-ended a driver at a red light, the athlete may make pleasantries, exchange insurance information and be quickly on his way to grab a campus burrito for lunch.

Nowadays? That’s a million-dollar quarterback behind the wheel of a flashy vehicle who is rear-ending a driver – a potential five-alarm financial fire.

“If you get rear-ended by the quarterback now, you think you won the lottery,” Bill Gatewood of insurance wholesaler Burns & Wilcox told On3. “You’re going to lawyer up. You’re going to sue that kid for everything you can. As opposed to some other senior who is driving a 12-year-old pickup truck rear-ending you – and you’re just kind of pissed off that you have the aggravation of it, you exchange numbers and everybody goes about their business.

“Athletes are always targets for lawsuits. It’s just being pushed even younger. It’s a fascinating thing to see what all this NIL money and exposure are going to do.”

NIL Era creates risk for athletes

As the NIL Era approaches its third birthday, this is an unexciting, often-overlooked aspect of the changing dynamic for college athletes. With an increasing number of power conference revenue-producing athletes enjoying high six-figure (or more) compensation packages, and with even more dollars on the way because of a coming revenue-sharing model, a new world of heightened risk is emerging that some high-profile athletes may not have ever considered.

Gatewood and his team believe they are uniquely positioned to plunge into this emerging space.

As an insurance wholesaler, Burns & Wilcox distributes highly specialized insurance solutions to retail insurance brokers and agents, who work directly with college or professional athletes.

Given the heightened public profile of collegiate and professional athletes, they are considered high-risk individuals and often have a difficult time finding insurance. The largest independent wholesaler in North America, Burns & Wilcox works with retail insurance brokers and agents to write personal insurance for hard-to-place risks.

The public profile of an individual is sometimes too large for a standard carrier to take on. Many high-profile individuals – athletes, entertainers, celebrities, politicians, CEOs, etc. – fall outside the normal scope of standard insurance markets.

Consider this analogy: If you had a significant ankle injury, you’d want your internist to recommend a specialist, an orthopedist, for you to see. You’re unlikely to prefer having a general practitioner examine your ankle. It’s the same thing with insurance coverage and risk management. 

‘A fascinating subculture within a subculture’

Less than three years into the NIL age, Gatewood, who leads the company’s national personal insurance practice, said the need for highly specialized insurance coverage for high-profile college athletes is already here, especially if you’re a top-tier future pro in a revenue-producing sport at a major college program.

“This is a fascinating subculture within a subculture,” Gatewood said.

“Go back three or four years ago, insurance carriers didn’t want to write rookie professional [athletes] because they’re really young and for the first time, they just got handed a mountain of money. Are they going to go down the road of getting into fights and car accidents? Buying Lamborghinis and losing their minds, like some of them do? Or are they going to turn out to be pretty decent human beings? 

“Generally, the test used to be to insure them when they get their second contract … Now we’re pushing that back even earlier before they have even gotten their first pro contract. Some of these [college athletes] are making hundreds of thousands and some are making in the millions of dollars. So you’ve got an 18-year-old kid on a college campus with a million bucks.

“Put yourself in that position.”

What type of coverage applies in NIL Era?

For those college athletes, nothing is garden variety about their lives.

Heather Posner oversees the high net worth group within the Burns & Wilcox Personal Insurance Practice. In the example of a million-dollar quarterback rear-ending a driver, Posner said, “It would probably be going against their parents’ liability insurance. It would go against liability on the auto [insurance], and they may or may not have an umbrella. It’s amazing what small portion of the population – just the general public – has umbrella coverage. So they’re very much under-insured from a liability perspective.”

The Burns & Wilcox Personal Insurance Practice writes policies that cover everything from high-value homes, investment properties, umbrella liability programs, and collections, which include jewelry and sports memorabilia. The practice works with about a dozen brokers who write insurance policies for college and professional athletes, along with hundreds of other high-profile individuals.

‘Exposure we have not seen before’

From an insurance standpoint, Gatewood said, the company is creating a new class of business for a new class of well-heeled, high-profile college athletes. It is a space that is untested. To that point, he paid particular attention to the headline-grabbing NIL deal in the fall at the University of Utah. 

The donor-funded Crimson Collective leased every football player a new 2024 Dodge Ram 1500 Big Horn truck for free. Two months later, the collective announced a historic deal for two of Utah’s women’s sports. All eligible athletes – including walk-ons – on the women’s and men’s basketball and women’s gymnastics teams were given the option to receive leases for one of two vehicles: a 2024 Jeep Grand Cherokee L Limited Edition or a 2024 Ram 1500 Big Horn truck, complete with the Night Edition package.

As Gatewood said, “That is exposure we have not seen before.”

Risk management critical in NIL Era

For high-profile college athletes, education on risk management is critical. 

Consider one-and-done college basketball stars making the quick jump to the NBA and receiving a sudden influx of dollars. That scenario has made for difficult exposure. But at least they typically have had a team of people assisting them with navigating risk.

Whether those best practices were followed or not, they received formal rookie training from the league and, presumably, from their personal support group on minimizing risk as well as practicing financial responsibility and social media accountability.

Now, in the NIL Era?

“A 19-year-old sophomore – pick a school – who buys $250,000 worth of jewelry and needs insurance. They’re living in a dorm, or they’re living in some athletic facility on campus – I don’t know anybody’s going to want that,” Gatewood said. “It is going to be a real test of the market to see what comes out of all this money and how they spend it. Because I can see somebody coming to us with a big Cigar [Cigarette] boat that they bought. They barely have been driving a car very long. Now they’ve got a boat that they don’t know how to handle. And they don’t think and nobody tells them, ‘Don’t do that.’

“We have pro athletes who buy stuff and people say, ‘Don’t do that.’ They say, ‘I’m going to do whatever I want.’ And they have trouble getting insurance. And now these athletes are in college? It’s going to be interesting.”

Potential litany of cautionary tales

As more athletes secure quick money through NIL deals, and as the money flowing to athletes increases amid further changes to the collegiate model, the concern is that without the proper support network and guidance, the recognition to secure specialized insurance policies could be lost amid the dollar signs.

The result? A potential litany of caution tales and fender benders that could turn into five-alarm financial fires.

“I’m worried that the way folks are going to learn is going to be through example. Somebody’s going to have this really lucrative contract. They’re going to get into that car accident, and they’re not going to have the right amount of liability insurance,” Posner said. “And they’re going to get sued.

“Insurance isn’t an exciting thing for people to think about. But it’s so important. And when you think about going to a specialist, if you’re one of these athletes, do you want to go to somebody who’s never dealt with anyone like you? Or someone that has thousands of clients just like you?”