Bollywood Movies: An Insurance Perspective
With the controversy surrounding a recent Hindi movie it is a good time to review how film or entertainment insurance policies have developed in India.
On the wake of different controversies surrounding recent films with historical references, production houses are now aware that films can be impacted not just in the pre-production and production phases, but also even after it has been released.
Like the recent events, it is not rare in India for a movie, particularly with a historical context, to be banned in multiple states even before the Central Board of Film Certification certified the film. For such films, mob attacks and disruption in production stage causing a delay in the release of the film, is not uncommon either. Luckily, there are insurance policies which are often used and come in handy in such cases.
Now let us look at how, an insurance cover can be beneficial for such mega projects.
Bollywood started taking insurance seriously from the late 1990s. Since then, insurance has become an indispensable part of films in Bollywood. For the initial 8-10 years, filmmaking was treated as project insurance, where the cover ceased on completion. However, in 2009, after an outbreak of Swine Flu, authorities in Maharashtra ordered a shutdown of public places like schools and theatres. This badly affected the collections a couple of high profile movie releases that took place at the time. This episode prompted the introduction of the ‘distributor’s loss of profit’ cover.
At present, nearly 70% of the films produced in Bollywood are covered under insurance where as big-budget films from South India are also looking for insurance covers. For regional movies, insurance adoption or penetration is presently at around 25%.
Currently, there are two broad types of covers associated with filmmaking in India, namely Film Production Package Insurance and Distributor’s Loss of Revenue (DLOR) Insurance Policy. Sum insured for both the policy varies with the premium paid.
According to Marsh India analysis, the film insurance market in India is now at INR 300 million, in terms of premium collection, and the market is growing at 25-30% annually. With the advent of the “100 crore club” or movies where gross collection exceed INR 1 billion, a film producers are now opting for production policy with coverage of INR 700 million to INR 1 billion and DLOR policy of over INR 1 billion. Typically, premiums for both policies range between INR 2.5 million – INR 3.0 million for a INR 1 billion coverage.
How it works
Firstly, the Film Production Package Insurance comes into effect in the pre-production and production stages. The policy covers any damages to the sets and its equipment. The policy also covers any losses if production of the film or shoot is affected due to other perils like adverse weather conditions or act of god incidents like earthquakes and tsunamis. Additionally, some other potential risks like injury/critical illness to the lead artistes leading to disruption or delay in shooting are also covered by various insurers.
Subsequently, Distributor’s Loss of Revenue Insurance Policy comes into effect once the movie is released. Once a film is completed, the distribution and satellite rights are sold to Film Distributors (India & Overseas), including Satellite TV and online streaming right holders. Through this policy distributors safeguard their projected income. Some risks that the policy addresses include the impact on the post-release revenues due to factors like opposition from some political/social groups, calls for boycotts/strikes and violent protests and riots, acts of God such as floods or earthquakes. However, loss of revenue due to bans by state governments are, in general, excluded under the policy terms. However, bans by any other groups, organizations come under insured risk.
DLOR is offered by insurers covering these risks. The cover commences before the release of the movie until 60 to 90 days after.
Films released in 2017:
*Source: Film Federation of India
Types of covers:
• Film Production Package Insurance.
• Distributor’s Loss of revenue insurance policy.
Average sum insured:
• INR 700 million to INR 1 billion for Film Production Package Insurance.
• INR 1 billion and above for Distributor’s Loss of Revenue Insurance Policy.
Premium rate: INR 2.5-3.0 million for INR 1 billion coverage.
Indian market: INR 300 million, in terms of premium collection, growing at 25-30% annually.