The Hindu Business Line : Films are good business for general insurers

But film producers have taken to insurance in a big way only about a year ago. And film insurance products have suddenly become hot sell for all the insurers. This is especially since Bollywood has some big budget films in the pipeline.

But the leader in the product is the public sector general insurer, Oriental Insurance Company Ltd (OICL). OICL's officials said they had so far provided cover to about 10 films under production this year.

These include films like `Cape Karma' and `King of Bollywood' aimed at international audiences produced by Idreams. Both these films are due to be released during the course of the year.

What has provided a fillip to film insurance is the involvement of bank and institutional financing.

So far Indian commercial films have survived on informal sources of funding, including the underworld. In such funding, insurance was never a covenant.

This meant that the funding costs would be astronomically high. With the increasing involvement of banks and financial institutions funding costs have come down.

Funds are priced on PLR plus basis. But financiers seldom extend clean loans for film production. Banks and financial institutions insist on physical asset cover that include all the equipment of the film producers and the master copies.

Sources said that financiers' insistence on insurance was to cover against the potential risks. The risks covered all three components — property, liabilities and third parities inclusive of medical insurance. This kind of coverage automatically implied that the film crew, including the stars, would be fully covered against injury or accidents. In the past, such costs had to be borne directly by the film producers themselves.

The sources said that even covers against the failure of films at the box office were possible. However, as the coverage increased, premiums also increased. Premiums charged for film insurance products presently were in the range of about 1.5 per cent of the sum assured.

The sources said each of the films covered had a sum assurance of close to Rs 10 crore. Despite this large cover size, insurers said there was adequate capacity among the insurance companies for meeting the film industry needs. Only in the case of liability covers, insurers resort to reinsurance, the sources said.

But the reason for the enthusiasm for film insurance products among the insurers was not glamour.

Insurers are reputed to be hard nosed when making claims payouts. In the case of the films, so far the claims experience has been good, the sources said. Good experience implied that the claims in the industry were very low compared to the premiums collected.

Nobody is mentioning numbers. The sources said that `good' implied that the claims were under 50 per cent, compared to other products. This implied greater retention, which translated into greater profits.

The sources added that covers were made available for shooting in foreign locations. However, in such cases in the event of claims being invoked, the claims would be made only in the currency in which the premium was paid.

The foreign exchange risk would have to be assumed by the film producers themselves, they said.

More Stories on : General Insurance | Cinema

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Buyer's credits for imports: A win-win proposition

Rupee up 7 paise

Citibank India to retain profits for expansion, upgradation

SDG Soft, Infosys to integrate tools

Canara Bank, TAFE tie up for tractors

Tata AIG Life has new logo, slogan

Films are good business for general insurers

RBI eases overseas lending norms for exporters

HDFC Bank securitisation

IOB to open office in China by December

APSFC sets loan target at Rs 500 cr

17.4 pc rise in AP credit plan outlay

Federal Bank to issue 2:1 bonus