The resplendent mane of the Pittsburgh Steelers' Troy Polamalu now comes with a price tag. Head & Shoulders, the Procter & Gamble (NYSE: PG) shampoo property, has insured Polamalu's nearly 3 feet of magnificent tresses for $1 million. That policy might seem like a ridiculous waste to you, but Procter & Gamble's not as crazy as it might seem.
While the payout for any damage to Polamalu's hair -- or, perish the thought, the menace of male pattern baldness! -- is sizable, the premium Procter pays probably isn't. Remember that insurance is all about putting a price on odds.
Insurance giant Berkshire Hathaway (NYSE: BRK-B) has insured all kinds of wacky things, including a PepsiCo (NYSE: PEP) contest that offered the (remote) chance that some entrant might win $1 billion. Per another policy, Buffett stood to lose $30 million if France won the World Cup. It didn't happen, though.
If the odds are very small that anyone will win the billion-dollar jackpot, or that Polamalu will suffer any sort of hair loss, then the cost of the insurance premium will likely be low. If you live in a place where an earthquake is very unlikely, you can probably add earthquake insurance to your home insurance policy for very little.
Whether a company wants to protect an endorser's valuable asset, or safeguard its funds for a buzz-creating contest, using insurance or other risk-cutting arrangements can be a smart move, as long as the price is right. The copious free publicity Procter & Gamble will gain from its outlandish policy on Polamalu probably doesn't hurt, either.
