Symbiosis Centre for Information Technology

Project Report On

Film Insurance In India

Submitted by

Name : Aarti Vig PRN# 9030241001

Name : Abhishek Harbhajanka PRN# 9030241004
Name : Manohar Gadre PRN# 9030241015
Name : Nevin Sunny PRN# 9030241018
Name : Priyashree Rai PRN# 9030241022
Name : Utpal Rohit PRN #9030241040

Stream : ITBM
Batch : 2009 - 11
Subject/Code : Domain Study
Semester : Sem I

Date : 30 Aug 09

For Office Use only

Marks out of :

Name of the Faculty : Prof. Abhishek Ojha

Signature of the Faculty :

 Symbiosis Centre for Information
Technology
(A constituent of SIU Established under section 3 of the UGC Act 1956)

Declaration (Group Work)

Program and Subject: Domain Study

Assignment Title: Project Report on Film Insurance In India

Submission Date: 30-08-09

We undersigned students of MBA (ITBM), Batch 2009-11

declare that, to the best of our knowledge and belief, this
assignment is our own work, all sources have been properly
acknowledged as per IEEE or APA guidelines given by the
institute, and the assignment contains no plagiarism.

We further declare that we have not previously submitted this

work or any version of it to any other institute/university for
assessment.

Group PRN Student Name Topic Signatur

No e

1 90302410 Aarti Vig Domain

01 Study

1 90302410 Abhishek Domain

04 Harbhajanka Study

1 90302410 Manohar Gadre Domain

15 Study

1 90302410 Nevin Sunny Domain

18 Study

1 90302410 Priyashree Rai Domain

22 Study
 1 90302410 Utpal Rohit Domain
40 Study

Date of signing: 30-08-09

Film Insurance in India

Abstract

This paper is aimed at understanding the film insurance in India. The paper is an attempt to
trace the development of film insurance in India. It starts with a brief description about size
of Indian film industry. Then it explains the situations under which film insurance became
unavoidable in India. Further it elucidates the different heads, which are generally covered
under the film insurance. The paper further lists, some major insurance players in the
industry and their share. It also explains the reasons for lack of propensity towards
insurance by major players in film industry. Finally as a conclusion this paper predicts the
future of Film Insurance.

1. Introduction

In the wake of swine flu scare in the state, the Maharashtra government on 12th Aug09
announced a closure of all Multiplexes in Mumbai and Pune till 16th Aug09. This meant a
loss of around 25 crore of revenues for the film industry overall. Films like Kaminey and
Life Partner releasing on 14th Aug are expected to have lost 25% of weekly revenues. But
the impact of loss was cushioned to a great extent because both films were insured and
the losses would be shared by insurance firms with the producer. This clearly illustrates
the practice of insuring films helping the film producers to deal with adversities.
2. Size & Scale of Indian Film Industry

Since 1931 when first talkie film “Alam Alra” was produced, more than 67000 films have
been produced in about 30 different languages and dialects. In 2001 the industry produced
1,013 films making it the world's largest feature film producer. Although south Indian
films made in four languages viz. Tamil, Telugu, Kanada and Malayalam are more in
number as compared to Hindi language films, but the Hindi language films take the
largest box office share. According to Pricewaterhouse Coopers report the Indian film
industry is expected to grow at CAGR of 11.6 % reaching Rs 185 billion in 2013 from
present Rs 107 billion in 2008. The major contributors to this revenues are theatrical
sales, overseas rights, music rights, television and video rights , corporate sponsorship
and merchandising in that order. The Figure 1 clearly illustrates the growth and major
segments contributing to growth of the Indian film industry.

(Source: http://www.interworld.co.in/digital_cinema/industryOverview.php retrieved on

27Aug09, all figures in Billion Rupees)
 Figure 1

3. Factors leading to Need for Insurance

There are various factors that have led the producers to readily accept and acknowledge
insurance for their films. Let us examine each of the factors in detail.

a. The intriguing romance between risk and reward in the film industry.

When we analyze the development of film industry from its golden age (year
1940s to 1960s) we find that, as compared to that time film making has become a
costly and risky proposition today. Due to the immense growth in technology and
the entrance of Hollywood studios, now making a film involves a huge sum of
money and depends on several contingencies. Huge sets, highly risky stunt scenes,
outdoor and foreign locations, very sensitive equipments, a huge amount of
compensation paid to the actors and a lot other factors, has made Indian Films a
very risky business. As compared to budgets that big banner films had in golden
ages to the films being made today, there has been a huge increase.

The number of films that go flop in a year is also an indicator of the risks
involved. Take the case, this year out of over 60 Hindi movies released so far only
three movies viz New York, Kaminey and Love Aaj Kal have been able to perk up
the business and end up with net profit. In addition to risk of film flopping at the
box office, the producers are also susceptible to several other risks. Financial risks
involve raising of funds from various financers like banks, FII’s, private financers.
Production risks involve film production getting extended beyond schedule,
overspending and extra expenditure due to accidents on sets. On the other hand
distribution and exhibition risk, risks due to piracy and post release risk also
involve distributors, exhibitors. This clearly demands some kind of mechanism
through which a producer can be assured that; in case of these contingencies he
will be indemnified.

b. Unforeseen contingencies
 There are numerous unforeseen adverse conditions that affect the box office
collection of a movie. One such example is given in the Introduction section of
this paper where producers lost out on 25% of revenues because multiplexes in
couple of metros were closed due to swine flu scare. There are many more
incidents that affect the performance a film at box office. However it was arrest of
Sanjay Dutt during 'Khalnayak' which prompted Subhash Ghai to insure his next
movie 'Taal' for which he paid Rs 1.5 million as premium for the film valued at Rs
110 million.

c. Drop in percentage of insurance premium.

Initially it was felt that paying a premium of 6 per cent of the production cost, as
is prevalent abroad would be too steep for Indian film producers. However, as
time has passed premiums have dropped to as low as 1%, as more and more
producers opted for cover.

d. Film production got an Industry status in the year 1998.

Film production got the industry status in 1998 and RBI allowed banks to lend for
film production. On security aspect, RBI stipulated that lending institution should
take rights to negatives of the films being financed. In addition to this RBI asked
banks to take as security items like music, audio or video rights, CD or DVD
rights, internet rights and satellite rights. This led to production houses lining up
to banks to get finances. However banks insisted on corporatisation and risk
insurance as perquisite for loans.

e. Corporatisation of Film Industry

Over the years there has been a significance rise in corporate houses producing
films. Reliance’s Big Entertainment, UTV, Pritish Nandy Communications,
Percept pictures are some prominent production houses who are involved in film
producing in an organised way.

4. Film Insurance current scenario, major players

Producer Yash Chopra claimed a compensation of Rs. 3.5 million from United India
Insurance when Aishwarya Rai had an accident, her shooting schedules were disturbed
and a set that was put up had to be brought down. This is was the first instance when the
insurance benefits were claimed by a producer.

Ever since the movie Taal was insured more and more producers have rushed to insure
their movies. The Table 1 shows some prominent movies that were insured and the
premiums for which they were insured.

Movie Producer Insurance (Rs.

millions)
Taal Mukta Arts 120
Mohabatein YashRaj Films 150

Lagaan Aamir Khan 150

Productions
Kabhi Khushi Kabhi Karan Johar 220
Gham

Ashoka Shahrukh Khan 70

Dil Chahta Hai Ritesh Sidhwani 180

Ek Aur Ek Gayarah David Dhawan 100

Kuch Na Kaho Ramesh Sippy 140

Deewaar Gaurang Doshi 300

Table 1

Apart from the above mentioned movies some other movies were also insured such as
Saathiya, Joggers Park, Asambhav, Chalte Chalte, Main Hoon Na, Taj Mahal, Khel,
Ganga Jal, Kal Ho Na Ho, Lakshya etc.

United India Insurance (UII) has been the largest player in India in the film insurance
market. It has insured over 50 films and is expecting to double this figure soon. Bajaj
Allianz General Insurance Co is another firm that is also into the film insurance business
in a big way. It has witnessed a 50% increase in premium during the year 2006 and
expects a premium growth of 30% for the next few years. Although the state-run Oriental
 Insurance Company ventured into the film insurance business by underwriting a Hindi
film few years ago, it has restricted its business to insuring star nights and cricket matches
since then. Another state-run New India Assurance Co insured the Rajnikanth starrer,
Sivaji The Boss. Hindi films like Babul and Baghban were some of the Bollywood films
that have been insured by New India Assurance Co. Normally, the premium charged by
an insurance company for insuring a film comprises 1%-1.5% of the total budget of the
film.

5. Film Insurance types and coverage extent

Leading insurance companies have agreed to compensate for delays and losses due to
cyclones, bandhs, strikes, adverse weather conditions and traffic interruptions as well as
harm to individuals involved in film-making. Depending on the type of policy one takes,
insurance in Hindi films can be grouped under the following broad heads.
1. Named Artistes such as the Main Cast, Important Support Cast, Directors, Technicians
etc.
2. Properties, Sets, Production Equipments, Negatives etc..
3. Public Liability
4. Money Insurance
5. Workmen Insurance
6. Accident Insurance

5.1 Choice of Type of Policy & Coverage head

Once again, the type of policy you want relies on the type of film you plan to make.
Obviously, if you are making a short documentary film, the type of policy you want will
differ from a filmmaker who aims to make a feature-length film. There are basically three
types of policies: short-term, long-term and annual. Short-term policies are used for single
production, such as a commercial. A long-term policy is used for several projects during a
longer period of time. An annual policy is reserved for ongoing projects, such as
documentaries, industrial, commercials and education (DICE). DICE policies typically
last for one year.
For a typical movie various covers typically exist. Depending on the type of movie one is
making, one will need to take one or all of the above coverage’s as a part of the policy.
For example in a movie like Devdas where large sets have to be put in Film City, the
policy will be heavy on insurance for properties and sets whereas for a movie like Kaun
which is shot in just one room this kind of insurance can be completely avoided. Also in a
movie like Khiladi 420 where a great number of stunts have to be performed by the actor,
extra insurance may be taken for Accidents whereas in a movie like Aastitva this may not
be required.

5.2 Coverage types, insurers liability and exclusions

1. Named Artistes such as the Main Cast, Important Support Cast, Directors, Technicians
etc.:-
Coverage in such cases can be claimed due to non-appearance which may arise due to -
death, accident/illness involving hospitalization, death in immediate family, natural
calamity, complete breakdown of transport system, riot/strike/civil commotion/curfew
like situation prohibiting the cast from reaching the site of shoot, acts of kidnap, murder
etc
Insurer's liability is restricted to reimbursement of lost remuneration in event of above
events, reshooting expenses and losses due to expenses on account of
cancellation/postponement etc.

However no cover can be claimed if the cancellation has taken place if the person is an
accused criminal under arrest, detention, interrogation etc. or accidents arising out of
participation in hazardous stunts or conditions like pregnancy etc.

2. Properties, Sets, Production Equipments, Negatives etc.:-

Coverage in such cases is due to losses arising out of fire, flood, storm or any other acts
of God or natural calamities or accidents due to main cast /accidental/external means or
acts of riot/strike/ civil commotion etc. or terrorism/theft/burglary/dacoity or risks of
transit
Insurer's liability is limited to material damage, additional expenses on account of
bringing back things to normal, irrevocably lost insured expenses on account of
cancellation/postponement etc.
 Major Exclusions are due to objects of art unless valued and declared or wear &
tear/inherent defects electrical and mechanical breakdown of equipments or inventory
losses or deterioration of negatives because of humidity and other atmospheric conditions.

3. Public Liability:-
Coverage is due to injury/loss to members of public and their property which can include
indemnity for court or fees, advocate's fees, legal costs and expenses incurred with
Insurer's consent in the successful defence of suits/writs/summons brought against to
prevent the film being shot further or being released. For example Kaun Banega Crorepati
had taken this type of Insurance against PIL (Public Interest Litigation). Major exclusions
exist in this case are fines, penalties, punitive damages or liability assumed by virtue of an
agreement which are explicitly excluded.

4. Money Insurance
Coverage in this case is cash in transit between shoot locations or cash kept at the shoot
site (under lock and key) or cash embezzled by the authorized person of the insured but
detected within 48 hours of the occurrence. Insurers Liability is Rs.200000 per incident of
loss with an overall limit of Rs 600,000 during the period of the policy. Major Exclusions
include personal cash of any nature or unattended cash or loss arising out of use of
duplicate key whilst the cash is kept in the premises outside business hours.

5. Workmen Insurance
Coverage includes bodily injury resulting in death/disability to the workman arising out
of and during the course of employment on-shoot locations. Insurer's liability is as per the
provisions of the Workmen Compensation Act.

6. Accident Insurance Coverage

This coverage is for all members of the production team on-location and/or off-location at
a predetermined rate. Coverage can be claimed for bodily injury resulting from accidents
caused directly and solely by external, violent, visible means during the policy period.

6. Linking box office success to insurance

 Due to huge number of flops every year, there is increasing demand to cover the box
office performance of a film in the Insurance policy. Let us now various aspects of
insuring the box office success a film.

The positive effect of this step would be that producer would make the films free from all
the worries about films fate at box office. Producers and directors would take many
courageous steps and come up with new experiments. Then, even newcomers would also
dare to enter in to this profession. The repetition of the same formula again and again due
to fear of failures would also be reduced. The quality of the films will improve and new
ideas and stories will come forward. Art films, which are in very poor state, will
rejuvenate once again and people would be more forthcoming on investing in them.

However there are some negative aspects to this as well. The first problem is regarding
the criterion on which the performance of a film would be judged and assigned hit and
flop accordingly. It is very difficult to find out a straightjacket formula according to
which the performance of a film would be judged and that essentially makes almost
impossible to calculate the amount of compensation. Secondly due to advent of overseas
rights and musical rights films including those which are shown flop, recover their cost
even before their release and in such a case recovering money from your insurer could
amount to fraud. Lastly there is a huge possibility that this kind of coverage could lead
producers and directors to compromise on creative content. They would make
substandard movies without caring for the quality to recover from the insurance company.
They could try to exploit this situation to their benefit and there would be a huge amount
of fake cases. This will lead to a floodgate situation and it would become impossible for
an insurance company to work.

So the linking performance of movie to insurance is not a viable option.

7. Hindrances to Film Insurance in India

In spite of the drop in insurance premiums down from 4-6 % to 1-1.5 % there are only a
handful of producers who have shown propensity towards insurance. There is still a
feeling among producers that insurance premium outflow merely adds to the budget of
movies and hence is definitely an avoidable expense.
 The main obstacle is the nature of film insurance. Though the film insurance cover things
like reimbursement of expenses incurred by the producer due to the death of principal
stars, loss or damage to sets, wardrobes, costumes machinery, equipment owned and
destroyed due to fire and other perils, as well as theft there are many more areas left.
Consider the case, recently top bollywood stars Sanjay Dutt and Salman Khan have been
flitting in and out of jail leading to many producers having sleepless nights. Both the stars
have an estimated Rs500 crore riding on them. But the insurers point out that insurance is
a civil liability and loss of expenses due to a film star being in jail cannot be covered
under the film insurance policy.

Film insurers, give insurance based on host of parameters like the reputation of
production house, the producers & directors, track record of hero of the movie etc.. which
are subjective and to an extent non tangible. In addition there are numerous quantitative
data that insurers ask like complete details and breakup of the budget of the film and
shooting schedules including date, locations and scenes. Thus there is a requirement of
through transparency between producers and insurers, which is very difficult to achieve
given the fact that most production houses are disorganised in their structure.

8. Conclusion

Film insurance is still to realise its full potential in India. But as number of production
houses jumping in to produce movies in a professional way increases, the film insurance
industry is surely to boom. Also, with a number of multi-starrer, multi-crore budgeted,
high stake movies coming up, there is going to be a huge shift in the trend from no
insurance to insured movies.
At the same time to make its mark in India, the film insurers also needs to make changes
in the policies and areas covered, as there shall be no apprehension left on the part of the
producers to opt for such a safe bet.

References

Anurag Diwedi, ‘Film Insurance in India’,

http://www.legalservicesindia.com/articles/film.htm, retrieved on 23Aug09.
Case study of Film Insurance & Financing in India, Case codeFINC012, Period: 1998-
2002, Organization: UTI.
http://www.icmrindia.org/casestudies/catalogue/Finance/FINC012.htm

Kumud Das, ‘Bollywood is still insurance shy’, September 4 2008, Financial Express,
http://www.financialexpress.com/news/bollywood-is-still-insurance-shy/214226/2
retrieved on 22nd Aug 09.

Punam Chakravarty FIII Mumbai, ‘Film Insurance In India’,

http://www.insuranceinstituteofindia.com/InsuranceInst/Publication/Uploads/Journal-Jan-
June-03/j-punam%20chakravarty.pdf, retrieved on 26th Aug09.

‘Insurance Firms Help Film producers cover up loses’,

http://ibnlive.in.com/news/insurance-firms-help-film-producers-cover-up-losses/99480-
17.html, retrieved on 25th Aug09.

‘Film Entertainment:-The passion and lifestyle of Indians’

http://www.interworld.co.in/digital_cinema/industryOverview.php, retrieved on 27Aug09