Film insurance in India

In December 1998, after signing the deal for Taal with Mukta Arts Pvt. Ltd, United India Insurance had approached a few London and Tokyo based insurance companies to re-insure the film. The re-insurer refused to re-insure Indian films, citing the complete lack of accountability in film production in India. The re-insure were looking for a commercially viable project, backed by detailed reports regarding the risks involved, the financing of the project and completion schedule etc. However, the issue of financing was found to be the biggest stumbling block for the development of the film insurance industry in India. The hesitance of the foreign insurance companies was completely justified as the Indian film industry was completely unorganized. Those were the days when the distributors, music companies and financiers were the major sources of funds for the film industry. The other prominent source of financing were financiers such as diamond merchants, brokers, builders and other cash rich businessmen, charged very high interest rates, generally in the range of 36-48% per annum. The cheapest source of financing for the film industry was underworld mafia.

The problem ended In December 2000, a Joint Institutional Committee on Financing Entertainment Industry submitted an interim report that laid down certain norms for offering financial assistance to the film industry.

The Cine Mukta Policy
In the history of Indian Film Industry, Mukta Arts Pvt. Ltd produced Taal was the first Hindi film to be insured. United India Insurance drafted the policy from scratch and honored producer-director Subhash Ghai with naming the policy The Cine Mukta Policy. The film insurance can not be standardized it is dynamic. The structure of the film insurance mostly depends on the film. A production house can take part insurance or can also insure entire film.

The insurance premium also depends on various factors. A film where large sets had to be put up, the policy would be heavy on insurance for properties and sets, a film shot in a single room/bungalow etc., insurance on the properties and sets could be completely avoided. A film where the actors performed dangerous stunts, extra insurance had to be taken. The insuring companies do not cover pre and post-production problems, box office results and the loss of profits.

Aishwarya Rai Effect
In June 2000, Aishwarya Rai met with an accident. The accident costed United India Insurance, a sum of only INR 1.6 million but it attracted substantial media coverage as it was the first instance of the Hindi film industry availing the benefits of film insurance. The film insurance was the in thing for the film Industry. United India Insurance, piggyback on the Aishwarya Rai Effect by July 2001, had insured around 8-10 films, for sums varying from INR 25 million to INR 220 million. The insured films included YashRaj Films – Mohabbatein, Aamir Khan Productions – Lagaan, Farhan Akhtar – Dil Chahta Hai, Karan Johar – Kabhi Khushi Kabhi Gham and Dreamz Unlimited’s – Asoka.

The credit for pioneering the film insurance business in India goes to the producer-director Subhash Ghai. He was the first Indian filmmaker to insure his film Taal. The landmark film Taal was insured for a sum of INR 110 million with United India Insurance in 1998. The move was welcomed by both media and film personalities as opening of a new chapter in the Indian film industry.