The Big Cover

Though the Indian film industry has been familiar with the concept of insurance since the 1990s,the trend of insuring movies to cover it on all grounds — production delays due to weather,sickness or equipment failure or loss of distributor profit when a film’s release is stalled due to political or health emergencies — dates back to the last three to four years. “Earlier,the big production houses restricted the insurance procedure to cover the important stages of a film’s production. The entry of film studios into India has changed the scenario,” says Thakkar. With shareholders’ money at stake,the studios started the trend of insuring their films against all odds. However,according to Thakkar,in cases like Kumar’s,the key lies in ensuring that the four production houses do not use the same insurance company to safeguard their films.

In the last two years,two new categories of insurances have emerged—Distributor’s Loss of Profit (DLOP) and Errors and Omissions (E&O). With audience and political parties often objecting to film content,as recently happened in the case of My Name Is Khan,DLOP became handy. It may have helped Fox Star and Dharma Productions,producers of MNIK,recover the losses from Shiv Sena vandalism against the film’s release. Though Fox Star India’s CEO Vijay Singh could not comment on any individual project,he did confirm that “all our films are covered on all possible counts”. Thakkar also cites the example of 3 Idiots-the producers will recover a DLOP claim for the loss of possible profits in the Telangana region due to the political unrest during the time of release.

Given that India is waking up to issues related to intellectual property rights,E&O is a progressive move. “Take for example last year’s release Hari Puttar. It has filed a claim to recover money after Warner Bros took the producers Mirchi Movies to court for the similarity of title to Harry Potter,” Thakkar says.

A film can get a 100 per cent cover on any of the counts— except the success of a film at the box office— and the premium payable varies between 0.3 and 0.8 per cent of the cover. However,how much of your insurance claim can be recovered is decided by the insurance company’s committee that investigates the claim. So what was initially looked at as unnecessary expense by producers is now considered a minimal cost incurred to safeguard a project. “It’s like a life insurance policy— do you view it as an expense or are you happy that you are alive? A 0.3 per cent worth outflow in a multi-crore project is not worth saving if the chances are that it will help you recover your money in case of untowardly incidents,” says Vishwas Joshi,head,finance,UTV Motion Pictures,which releases Raajneeti in June.

Much of the credit for this change goes to the government,says Thakkar,since most of the underwriters are government insurance companies. “They opened up when the government recognised filmmaking as an industry,” Joshi adds.

The process of recovering your claim,can,however,get tedious. Vikram Bhatt,who owns ASA Productions says that film insurance is no different from an accident insurance and requires extensive documentation. “Every insurance claim has an eligibility period. So if my shoot for Raaz 2 was stalled by five days,I couldn’t file a claim until I had finally shot the delayed schedule and incurred the costs for it. In such cases,I have to have the paperwork in place,which the inspection team will go through before reimbursing the money.”

Thakkar,however,says that recovery is possible within two months of receiving all documentation. “We have recently helped films like MNIK,Kurbaan,Wake Up Sid and De Dana Dan recover their production insurance claims.” Today,Thakkar stresses,no film goes on floors without 100 per cent insurance cover but Joshi feels that as a practice,it is still in its nascent stages. “Both filmmakers and insurance companies are learning on field. Who would have imagined India would witness swine flu?” quips Joshi. One of UTV’s biggest films last year,Kaminey,suffered due to the swine flu outbreak across India and has filed for a claim under DLOP. “We were lucky to be covered under epidemics.”