Companies have hosted giveaway events and sponsored contests for years as a strategy for capturing consumer attention and increasing brand recognition. From car dealerships promising a new vehicle to a furniture store that offers money back on purchases if a particular sports team wins their respective championship, these promotions can lead to new business, increased revenue and additional social media exposure.

More than 90% of consumers remember a company that gave them a promotional gift or giveaway and more than three quarters continue to do business with that company after receiving a freebie.1

By their nature, contests can be financially risky because of the uncertainty of consumer response. Most companies are unwilling to risk paying out a large sum associated with a grand prize or the uncertainty of not knowing how many prizes could be redeemed. Over-redemption and prize indemnity insurance allow organizations to minimize the negative financial impact of an unexpected promotional payout, allowing the company to grow sales while protecting its finances.

Companies interested in implementing enhanced promotional offers should consider these factors:

Find the right promotion for the brand. Companies need to ask themselves what type of promotion or prize best suits the business, and what they want in return. For example, a Boston furniture company routinely offers free furniture related to the performance of the Boston Red Sox baseball team.2 It generates excitement and social media buzz, and more people may buy furniture with the hope of obtaining a refund on the product purchased. Similar offers from other companies are opportunities to reduce product inventories and reach sales targets.

Determine the financial parameters to find the right insurance coverage. The next step in the process is ensuring the promotion fits within a budget. If a company has allocated a certain percentage of every product sold toward this promotional offer, then any promotional offer to the consumer — whether self-insured or using promotional insurance — must fit within that target.

Once the budget is determined, the company needs to work with a broker to find the best insurance product that will allow them to reap the benefits of the promotion while remaining cost-effective for the organization.

For example, a grocery store may self-insure an offer of a $25 gift card to customers who spend $100 or more during a predetermined time period. However, that same retailer may find that by using promotional insurance, they could budget the same amount but offer $50 instead.

Additionally, the cost structure may have a low premium but a high deductible — reducing the grocer’s up-front commitment but protecting its budget if expenses exceed expectations.

Follow the policy to receive the payout. To ensure a company receives the full payout of any policy that insures a promotional offer, companies must follow the policy terms and conditions.  In general, promotional insurance underwriters are flexible in the parameters of what they are willing to insure and in the drafting of the policy. But once in place, the policy must be followed to ensure the appropriate payout. A broker can help secure promotional coverage, file claims and submit paperwork to help companies obtain payment more quickly.  

Contact HUB International’s insurance experts for more information on using prize indemnity insurance to create promotional opportunities.

1 Designhill, “5 Reasons Why Promotional Products Are Crucial for Any Business,” December 14, 2022.
2 CBS News, “Jordan’s Offering Free Furniture If Red Sox Pitcher Throws No-Hitter,” April 12, 2021.