New Coronavirus Clause Added Won't Help Bollywood Insure Losses

Like many other businesses in the country and across the world, the entertainment industry in India has been hit hard because of the coronavirus outbreak. From theatres shutting down in several states and film releases getting postponed to the shooting of film, television and web series coming to a complete halt - the entertainment industry is in a crisis that it has never witnessed before.

The release date of big films like Rohit Shetty's Sooryavanshi and Kabir Khan's 83 being postponed, does not mean just a change in dates for the film's producers. It means dealing with losses, dealing with insurance companies and handling the logistics of the change. While most of these big films are insured against the outbreak, it's still not as simple as it sounds.

The Quint spoke to Sumant Salian, business head (media and entertainment) at Alliance Insurance Brokers, who takes care of insurance for several media clients, including film production houses, distribution companies, film acquisition firms and theatres. "All insurance companies have been putting a specific exclusion on coronavirus related losses," Sumant says, so this puts all films that are affected currently under the scanner when it comes to the question of recovering their losses via insurance because of a fresh clause specifically about coronavirus that was introduced in contracts starting February.

Sumant Salian, Business Head (Media and Entertainment), Alliance Insurance Brokers"For a few big movies, which are scheduled to release at a particular date and time, an incident like this (coronavirus) can affect their delivery date. The insurance policy does not cover the delivery or the performance guarantee or timeline issues. The policies which are obtained before this prevailing condition, definitely they have a coverage for it."

"All insurance companies are putting a specific exclusion on coronavirus related losses. We've seen this exclusion starting from the month of February, when coronavirus (outbreak) was already declared and a few cases were seen in our country and neighbouring countries. So, any pre-existing conditions are excluded from the policy," he added.

In simple terms, if one is trying to buy insurance when one's house is on fire, will the person receive it? No, right? That's exactly what is happening with most films. The coronavirus spread increasingly and began making news in India from the month of February. So films that were insured before February will be covered under insurance policy as affected by "epidemic". But due to the inclusion of the COVID-19 clause, policies will not cover losses due to the coronavirus if the insurance has been bought in or after February.

According to sources, one of the big films with a star producer-director whose release date has been pushed, does not have the "distributor loss of revenue" insurance policy specific to coronavirus. This is the policy that kicks in when a film gets released, and suffers losses in case of some disturbance. This is a huge setback for the production house who was all set for the film's release in March. Producer Tanuj Garg, who has produced films like Tumhari Sulu, Neerja and Why Cheat India, says that these are testing times for producers, especially those who are in pre-production, with their shooting due to begin.

Tanuj Garg, Film ProducerThere are ticking fixed costs, which now need restructuring in the wake of delays, and also mounting interest costs. Also, we have been advised that production insurance apparently does not cover delays on account of the virus. Let's wait and watch! Let's again make it simple. If you are making a film, you need money for it. So, who is investing the money in your film? It's either borrowed directly from a bank or a studio (who also would have taken money from a bank). Now, if the shoot is delayed, bank will keep charging interest on the money borrowed irrespective of why the film has been delayed. So, as the delay keeps increasing, the interest keeps mounting. Another issue is that the dates of the stars are blocked, so, if the shoot of one film is delayed due to such unforeseen circumstances, then it's very difficult to get the actor's dates again. So 20 days of no shooting can turn into another month because the actor's future dates would have already been allotted to another film.

Many a times the dates for promotions are also blocked in advance, depending on the release date. So, if there are multiple big stars in a film, it gets even more difficult for the producers to match their schedules. Atul Mohan, Film business analyst"The cancellation of shootings is other major concern because once the situation is normalised, getting the combination dates of big actors will be a tough task. All the releases of 2020 will also undergo major reshuffle."

It's a difficult time for the film industry as a whole, be it daily wage workers or producers, everybody is affected in some degree. It will now have to be seen when films whose shoots have been stalled midway like Salman Khan's Radhe, Shahid Kapoor's Jersey, Karthik Aryan's Bool Bhulaiya 2, Aamir Khan's Lal Singh Chadha resume shooting and if their scheduled release dates get pushed. Also, now Rohit Shetty's Sooryavashi and Kabir Khan's 83 which were supposed to hit theatres on 23 March and 10 April respectively, might have to compete with other big films on their release dates, which puts a big question mark on the crores at risk for the industry.

Source: The Quint