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There is much more under the insurance umbrella today since Subhash Ghai insuring his movie Taal, a decade ago. Leena Mulchandani & Nandini Raghavendra find out the growing shelters filmmakers seek to mitigate their risks.

WHILE Akshay Kumar was busy jumping over the Great Wall of China, chasing Deepika Padukone in Chandni Chowk To China(CC2C), it was not just his fans whose hearts were in their mouth. There was one man, whose heightened pulse rate would have a doctor worried -Aatur Thakkar, director, Alliance Insurance Brokers, who had brokered the insurance deal with five film projects, all starring Kumar. If the dare-devil actor, who insists on doing almost all his own stunts, had injured himself while shooting for even one film, "I would have to entertain claims from all five because of the subsequent delays," says Thakkar still perspiring at the thought of such an eventuality. Other than CC2C, Thakkar had insured De Dhana Dhan, Hera Pheri 4, Tasveer 8x10 and Blue, which collectively meant that Thakkar had Rs 200 crore (along with a reality show that Kumar was doing) riding on the actor at that time.

Kumar's antics may have sent Thakkar into a tizzy, while events like the recent swine flu, which forced Mumbai and Pune theatres and malls to down their shutters for public safety, hit UTV's Kaminey badly. The only reason why CEO UTV Motion Pictures, Siddharth Roy Kapur was not wiping any beads of perspiration off his forehead was because he was covered under the distribution insurance which starts a week before the release of the film and is usually effective up to 60 days from the date of release. And to be sure Kapur is going to make the claim on Marsh India Insurance Brokers. "We will be making a claim but the figure will be dependent on the final cumulative performance and our understanding of total revenue loss caused by closure and swine flu," says Kapur.

Take the case of director Karan Johar who landed in Los Angeles for the first day of his shoot for My Name Is Khanand was faced with snow in November. It was the first time in the history of LA that it snowed in November. Allied Insurance is busy writing out the cheque to compensate the loss of the shooting day.

From the first insurance policy Subhash Ghai took with United India Insurance a decade ago for Taal, (Rs 12 crore), the film insurance space has grown by leaps and bounds. "When I started off in this space a decade ago, only the big producers understood the significance of insuring their films. Today, even the smaller producers are coming into the fold. I alone, have insured more than 400 films to date," says Ajit Gupta who formulated the first film insurance policy for Mukta Arts' Taal, which was consequently called the Mukta Cine Policy.

Gone are the days of plain-vanilla insurance, as the trade calls it. As film budgets grew, co-productions came into the picture, structured finance from banks flowed in, the need to mitigate the risks of filmmaking increased. "The money spent on insurance is not large but we have come a long way from the days when the industry did not even see the need for that spend. Today, the insurance industry has matured to the specific needs of the film industry and offers numerous options and plans to producers so that they can mitigate their risks. Even the plain-vanilla production insurance includes many new clauses keeping in tune with complex project requirements. All delays in shoots, actors' injuries and illnesses are covered. The production insurance premium spends are directly linked to the cost of production which would typically range from around 0.5% to 2% of the CoP," says Apoorva Mehta, CEO, Dharma Productions.

For new studio entrant Fox Star Studios, that percentage could go up to 2-3%. For CFO, Shriram Krishnan, the insurance clause is a must when they do any deal, be it for a big film like My Name is Khanor a smaller film like Quickgun Murugun. But going forward, for a twofilm production deal with Vipul Shah, the production (in which Krishnan includes Errors and Omissions (E&O) and distribution insurance will be followed to the T.

Litigation from various sources is a problem arising with alarming regularity in film after film. This is what an E&O insurance covers a producer from all film-related legal matters. Even as this goes into print, the Oscar-winning Slumdog Millionaire is fighting a Rs 5-crore defamation suit in the Bombay High Court filed by Nakul Singh Nepali who claims that one of the answers given by Dev Patel in the film is wrong. Kaminey too is staving off a case lodged against the producers of the film for hurting religious sentiments in Puri. "This is a fairly new cover which is something we have learnt from the West. This cover helps, specially in the case of Intellectual Property.

Rights (IPR) cases or any protests that arise in a particular place regarding a portion of a film which some people find objectionable," says UTV's Kapur. IPR is a point Mehta too emphasises, re-affirming the need to cover this risk. Thakkar too emphasises how critical it is for a film to have an E&O cover. "E&O will cover anything related to content of a film. Cases rising out of plagiarism, defamation, libel, title infringement and copyright infringement (which includes music) are covered under this," says Thakkar who has underwritten Kaminey, Blue and Aagey Se Right for E&O.

With times becoming more uncertain by the day and the industry having gone through one more learning curve post the one month long stand-off between producers and exhibitors, distribution too is seen as a risk area giving rise to a distribution insurance. "If we had been covered for distribution during last year's terrible Mumbai attacks, it would have certainly helped us for Oye Lucky, Lucky Oye," says Kapur who lost out big time on this critically acclaimed film due to Mumbai's 26/11, last year.

Distribution insurance policy is called "distributors loss of profit policy". Some distributors may opt for a lesser period. "The period from a week before the release to 60 days after the release usually covers the majority risk in distribution as the first 60 days is considered vital for business, especially with the current economics of the industry," says Sanjay Kedia, CEO and country manager, Marsh India which has covered distribution related risks for Kaminey. Most Hindi films that are produced by corporates and/or funded by banks are insured. "In most cases it's the banks that insist on insurance," says Thakkar. The growth of the film vertical for insurance players is directly related to the increased organised funding the sector is seeing.

While the space has seen major developments, led by the government insurance firms, there's still a long road to go when compared to the sophisticated products and policies in the West. Completion bonds, for instance, which are popular in the West haven't taken off in India. In 2005, General Insurance Corporation of India had offered to underwrite completion guarantees provided by Infinity Film Completion Services but the concept didn't work here.

A banker in the West will not fund a film if it wasn't bonded. Basically the bond covers completion risk, which is the risk of the film not being made within budget and schedule. With the completion of a film seen as the biggest risk for a financier, film bonds can make it easier to get organised finance for film projects. "The Indian film industry has its own peculiar challenges. It's a high-risk profile industry. So insurance brokers and companies have to understand the space and adapt to its challenges," says Thakkar.

Covers all risks related to the production/shooting of a film. Includes fire, injury or death of lead star cast, abandonment of project, loss of negative etc.

Will cover claims arising from defamation, libel, title infringement and copyright infringement.

Starts from a week before the release of a film to usually 60 days after the release. Covers any eventuality that does not allow natural business, release of a film, to take place.