Baahubali-2 insurer Future Generali explains risks, rewards in film insurance business in India
If a movie incurs a loss due to any controversy, as in the case of Padmavati, no insurance company is liable to pay for the losses
Baahubali-2: The Conclusion, the film whose Hindi version has set a stupendous box office hit at Rs. 245 crore, was insured for Rs 200 crore. This was for the Telugu version of the film. The policy covered the risks related to the film during the pre-production to post-production stage. The private insurance firm, Future Generali Insurance Company has been insuring films since 2008. From fighting shy of taking insurance to a growing interest in them, film-production houses have warmed up to the idea of insuring their films.
K G Krishnamoorthy Rao, MD & CEO, Future Generali Insurance Company, talks of the change in attitude towards insurance policies and the growth of the company to Firstpost.
Excerpts from the conversation:
What was the first film you insured and at what cost?
The first movie insured by us was Sorry Bhai in 2008 at a sum of Rs 5 core. From the first movie till now, we have issued 372 film policies, so far. In the recent past, we have provided insurance to several big-budget movies, including Raees, Rock On 2, Dil Dhadakne Do, Mohenjo Daro and Shivaay. All of these covers have been in the range of Rs 80-100 crore.
Of the 372 policies we have issued, about 160 were mostly for Hindi films in the last financial year. We would now also like to focus on the southern market since we are confident of catering to the unique requirements of the southern film industry.
What sparked your interest to film insurance?
Being a second generation insurance company, we commenced our business in 2007. As we started our business, besides the regular insurance products like motor, health, property and fire, we saw an opportunity in the film insurance. We insured the first film in 2008.
What is the revenue model you follow? How does it work?
Film insurance refers to insuring the film against unforeseen incidents like death, illness of an actor or occurrence of natural calamities or accidental damage leading to delays in the film schedule. It can also include coverage against accidents that damage equipment while shooting is in process. Additionally, it offers insurance against its legal liability to pay damages for third-party civil claims arising out of bodily injury or property damage.
The policy comes with various coverage sections and the premium rates vary for different sections. The highest rates applies to non-appearance and damage to equipment like camera where the rates can be as much as 1 percent of the sum insured. Other parts of the cover, such as personal accident, are much cheaper since it is for a limited period.
The acceptance of risk, in case of film insurance, is decided based on the number of days of the shoot. While small movies are completed in 6-8 months, big budget movies are completed in 12-15 months. However, an insurer, at no point, can issue a policy for more than 12 month (1 year) period. In case the shoot is not completed during that time, the policy can be extended on short-period basis. Any claims during the policy period are paid immediately based on the documentation/ information provided by the client to the insurer. The budget of the insurance comes from the production houses and each section limits in the policy are decided by them as well.
What is the criteria you follow on insurance for films?
While insuring a film, we look at the location where the shoot will take place and the duration of the shoot. We also take into account the cost associated with each day of shoot. Additionally, we look at the artists and crew involved in the film. Based on such multiple factors, we decide on the insurance of a specific film.
Is reinsurance also opted for in case of films as it is not a predictable business and highly susceptible. How do you cover yourself?
Reinsurance, in case of film insurance, is opted for only if the movie is made at a very high budget. If a film is highly susceptible, we don’t write the insurance on our own.
What have been the damages you have had to pay for films that you have insured?
Generally, we see damages due to storm at the time of shoot for which the shoot get cancelled or postponed. Also, there could be losses due to non-appearance of star cast on account of illness or injury. These are the most common types of claims reported to us.
How do you ascertain liabilities at the time of claim?
While ascertaining the liabilities, we take into account the cost of shooting each day which includes the expenses incurred for creating sets, hiring crew members along with costs of locations and other expenditures incurred.
Currently, one sees a lot of assault on cinematic expression like it happened with Sanjay Leela Bhansali’s Padmavati (read about it here). There were damages to be incurred as well with regard to Padmavati. It seems to be far easy to be embroiled in a controversy these days with a film than ever before. How do you approach movies which have a potential for controversy?
In film insurance, we cover damages during the shooting of the film. However, any cancellation or postponement of shoot due to any political threats is excluded in the policy. This exclusion clause is followed across the industry. Hence if a movie incurs a loss due to any controversy, as in the case of Padmavati, the insurance company will not be liable to pay for the losses.
In the case of Bahubaali -2, The Conclusion, which was insured for over 200 crore, what was the premium collected? Apart from this film, what is the average premium collected by you in this sector?
On an average, we collect the premium at rate of 0.50 percent to 0.70 percent of the total sum insured. The premium rates vary for different sections. The highest rates apply to non-appearance and damage to equipment like camera where the rates can be as much as 1% of the sum insured.
Insurance works on a pool, i.e. when a group of people want to insure in similar projects. In films, how do you manage a pool?
In film insurance, there is no pooling system. We insure the films individually as per our risk appetite. The commercial success of a film is not insured or insurable as this is a commercial risk to be taken by the producers of the movie.
Of the total premium collected, what is the premium contribution of movies?
We have collected a premium of Rs 4.67 crore over the last two financial years. As a percentage of our total revenue this may not be significant. However, we believe this is a specialised area where expertise will help us to grow this line in future.
You have mentioned that you would like to focus on South films now. Why the delay?
Till date, films made in the southern market have never believed in insuring movies unlike their Bollywood counterparts. But now the scenario is changing, considering the budget of these films have gone up remarkably and people have realised the value of insuring the risks associated with films. We expect more production houses to opt for insurance from the Southern markets.
What is the business model that is followed in West?
In the West, film insurance business is mostly driven by insurance agents/brokers.
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