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JayMT
Joined: 13 Nov 2005
Posts: 78
Location: Bargersville IN
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 Posted: Thu Sep 13, 2007 2:40 pm Post subject: How does "insurance" work? |
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I hear every now and then about players getting insurance from another person during a big hand, and I was wondering how that works. I presume that if the player loses the hand, the other person absorbs some of the loss. What kind of percentages are normal, both for the player buying insurance, and how much of the loss is covered?
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PauliF
Renaissance Man
Joined: 16 Jun 2004
Posts: 3492
Location: London
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| Posted: Thu Sep 13, 2007 2:47 pm Post subject: |
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dammit
i thought i was gonna write the actuarial post of my life |
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calgaryfan
Joined: 06 Dec 2005
Posts: 195
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| Posted: Thu Sep 13, 2007 11:16 pm Post subject: |
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I can't remember where (and I may be making it up!) but I thought I read an article some time saying that buying insurance was always -EV.
Anyway - back on topic - I'm no expert but if you google 'vigorish' I'm sure you'll be able to drag something up on it. |
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Ohjay
Joined: 03 Sep 2005
Posts: 992
Location: Sweden
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| Posted: Fri Sep 14, 2007 4:43 am Post subject: |
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A good(bad) example of insurance is this past WSOP, event #8... Hellmuth got insurance from Ivey on several hands.
The deal basically was, Hellmuth & someone else was all-in, and Ivey knew what % Hellmuth was to win. Then Ivey offered Hellmuth certain odds on his hand winning/losing. I can't remember the exact numbers, but something like, Hellmuth insured his hand for 20k, and if he lost Ivey would have to give him 80k, and if he won he would give Ivey the 20k. As for his hand to win, I think he was an 80% favourite or something like that. The memory is a bit fussy.
Anyway, Hellmuth made a lot of poor insurance bets in that event and lost a lot of money because of it. |
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Zool1
1K Club
Joined: 07 Apr 2004
Posts: 1265
Location: Crushing Pre / Spewing Post
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| Posted: Fri Sep 14, 2007 7:22 am Post subject: |
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| Quote: | | I thought I read an article some time saying that buying insurance was always -EV. |
It is. That's because in order for it to be worth offering, it has to be +EV for the insurer. Therefore it has to be -EV for the insured party.
Insurance in most forms of gambling means taking a small EV hit in exchange for a large decrease in variance. In ohjay's example, Helmuth was taking a -EV bet with Ivey knowing that if he won the hand and lost the bet, he'd have to pay up a small amount, but would still be in the running for the WSOP event. If he lost the hand, he's out of the WSOP event, but makes 80K from Ivey as compensation. It's not really that bad of a deal for anyone who's terrified of variance, but being afraid of variance in itself is a pretty weak tendency, especially when you have a bankroll the size of Phil Helmuth's...*
Another form of insurance (loosely speaking) in poker is the idea of "running it twice". This allows dealing out two flops and/or turns and/or rivers when two players are either all-in or mutually agree to close betting for the hand. If one player wins both times, they win the pot, otherwise it's split. Like the other example, it doesn't matter whether one player is a huge favourite or not - it allows both players to cut down on their variance, because it's essentially playing the hand the same way twice, and therefore in theory allowing you to reach the mythical 'long term' in half the time. However, unlike the above example, it involves no hit to either player's EV.**
* Note that Ivey is essentially increasing his own 'variance' by offering this bet in the first place (i.e. he could not offer the bet and have zero variance). This is because Phil Ivey is probably one of the best gamblers on the planet, and is as such looking for any +EV opportunity regardless of variance. Whereas Phil Helmuth is a nit.
** Assuming they play together for a long period of time, giving such occurances a chance to balance out. I guess it wouldn't necessarily be a good idea to do this when you're a 9:1 favourite over someone who'll take the money and run when they don't lose. Maybe  |
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jeffnc
Mason's Favorite
Joined: 13 Jan 2004
Posts: 7470
Location: NC, USA
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| Posted: Wed Sep 19, 2007 4:29 pm Post subject: |
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Insurance is about risk management, not making +EV bets (for the insured). That's why everyone buys insurance in real life even though it's -EV for the population in general.
If you had a large enough "coop" in your family or community or wherever, you really wouldn't need regular insurance, so at least it would be 0 EV for that general population and still reduce risk. (Obviously certain law thwart this, like car insurance being required by law in some places.) |
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Piemaster
Author of THE POKER MINDSET
Joined: 15 Jan 2004
Posts: 7804
Location: London
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| Posted: Wed Sep 19, 2007 5:04 pm Post subject: |
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| PauliF wrote: | dammit
i thought i was gonna write the actuarial post of my life |
Did it contain the word 'gimble'? |
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