IPL broadcasters go for higher cover than stadium owners: Vaidyanath B, SBI General

Vaidyanath B, Underwriting Manager, Liability Lines, SBI General Insurance, decodes insurance policies for IPL and other tournaments in terms of factors, policies and compensation 

SBI General

The ongoing IPL 2019 has SBI General Insurance entering contracts with Star Network and Cricket associations to insure matches against rain, earthquakes, fire and terrorist attacks. It also has different policies in place for World Cup 2019, Indian Super League and Pro Kabaddi League. 
 

In a chat with exchange4media, Vaidyanath B, Underwriting Manager, Liability Lines, SBI General Insurance, explains why broadcasters go for higher cover limits than stadium owners.

Edited excerpts:
 

Why did SBI General Insurance think of getting associated with IPL 2019?
In IPL there are multiple stakeholders. The first major shareholder is BCCI, then there are the respective franchise owners, the sponsors of the franchise owners, the broadcaster and stadium owners. So stakes are pretty high in IPL matches. Say for a match happening in Mumbai, the Maharashtra Cricket Association handles the sale of tickets and the average revenue they generate could be running into Rs 10-12 crore. Then if you look into the franchise, they are paying players certain money and the sponsors are paying the franchises to have their company logo displayed. SBI General had ‘events cancellation’ product for four to five years. But we were slowly studying the market and started writing this in the last 12 months. For IPL, we have a participative share wherein we cover a few stakeholders, a broadcaster and three cricket associations. 

 

What factors determine the cover limit?
The cover limit, in case of stadiums, depends on the ground capacity. Revenue generated from a cricket match in Mumbai is different from Kolkata’s Eden Gardens. Being a bigger stadium, the number of spectators for a match will be also more. However, the cost of tickets in Mumbai could be higher. So the factors differ, it could be the average cost of the tickets or number of seats. 

 

In case of a broadcaster, Star Network who is airing IPL wanted cover for loss of advertising revenues. In case of booked advertisement slots, there is loss of revenue if the match is not played due to rains or an earthquake, or a terrorist attack or fire at a specific location. The policy holder negotiates what could be the potential revenue they could earn in a particular match. So, for around 60 matches in the IPL, they find out what could be the possible earnings, and they protect that by means of insurance.
 

For example, for a match today Star earns Rs 40-45 crore. So, the per match limit will be Rs 40 crore. If the match gets cancelled, the ad slots booked can be used for subsequent matches. The adjustment factor plays a key role in understanding the quantum of loss. This the way it is negotiated and adjusted throughout the season. For stadiums, the cover may range from Rs 15-20 crore, whereas in case of broadcaster, since it is for an entire season, they take a higher limit of say Rs 100-200 crore.
 

What kind of premium do you charge from stakeholders?
The premium for cancellation of a match depends on the nature of the event. It can go from 0.1 per cent to 3 per cent. If a match is happening in India in May, it is better than it happening in England. Further, in case of India, in Kerala the rates are higher for May because that is the time for monsoons to set in. There is a higher probability for a match getting cancelled then compared to Delhi. The price factors are thus determined based on the venue. 

 

Does premium vary between a broadcaster and a stadium owner?
Yes they do. For a broadcaster, a match has to be played in its entirety. In IPL, it is a 40-over match and the cover is for the entire match. For stadiums or cricket associations, the cover will be on one-ball basis. The cover ceases after the first ball is bowled because the match has technically started. People have gathered at the stadium to watch the match anyway. In case of rains, there is no need for refund of tickets. 

How is the payout made?
If Star TV is not able to generate its revenue target, they have the provision to use ad slots of a cancelled match till the end of the tournament. But if after all adjustments, there is loss of some kind, SBI General will pay for it. So if a 40-over match gets reduced to 20 overs, they try to understand if the ad slots for the rest of the 20 overs can be distributed in the next matches. At the end of the 2019 season, they will do a review of the estimated revenue and also revenue that couldn’t be generated because of some peril. The difference, SBI General as a carrier will pay the claim for our share of participation in the risk. 

 

Cricket associations take into consideration the ticketing loss of revenue. If a match gets cancelled and they have to refund tickets, they cover that by the means of insurance. 
 

Will the same policies apply for World cup as well?
The trigger will be similar but each contract is specific. For IPL, it’s a 40-over match, whereas World Cup has 50-over matches. IPL is happening in India in peak summers but World Cup will be held in England where there are chances of rain. For a 40-over match, the number of ad slots is lesser than what it would be for a 100-over one. So ad revenues will be different as well. The cover will change accordingly. 

 

Within a tournament, does high pressure or most-anticipated games get more cover limit?
Viewership is at the peak during quarter finals, semi-finals or finals. When brands feel they have to push their product accordingly, it will have a higher impact on the revenue for the broadcaster. So if they are expecting revenue of say Rs 25 crore on that match, they take the limit for a higher amount to compensate losses.  

 

What kind of policies are negotiated for Pro Kabaddi League and ISL?
Kabaddi happens mostly indoor. The probability of some kind of peril indoors is lower than outdoor games. Cricket obviously gets a higher premium because of the interest and exposure. Kabaddi is the lowest as it is all indoors. Football can also be played during the rains. So, the cheapest is Kabbaddi and then comes football.

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