Production insurance is an absolute necessity for risk management of any production.
Throughout the world Film and TV productions are financed with a simple proviso that the production will have FPI (Film Producers Insurance), which is a standard line item in any budget. There are only a handful of insurers that specialise in this;
The SABC insists that they will provide the insurance cover for any SABC commissioned production directly through their own supplier who offers them bulk discounts.
The requirement by the SABC that producers must accept insurance through the SABC’s insurers is extremely problematic for the production sector because there is a direct conflict of interest in risk management. (Note this was implemented approx 2 years ago and has never been needed in the past as contracts required producers to take appropriate FPI cover)
Producers sign an SABC contract that we accept all risk and that we will deliver on time, within budget, etc. However we have no control over the insurance which is managed by the SABC – so if claims are not paid on time, or the SABC defaults on a payment and thus leaves the producers uninsured – the producer de facto carries double risk. It is the producer who has to carry the burden and risk with no recourse to the insurer or SABC
An Example of this is recently a well respected production company has been sued by a vehicle rental company as the SABC insurance has not paid a claim. The producer had to sign personal surety and is thus now personally liable.
As it currently stands, the producer cannot elect to use an alternative insurer and receive better cover or a more competitive service. As the SABC has made itself the “processor” or “conduit” for any claims, the producer carries the risk whilst the SABC wrangles with the insurer. The producer once again is at risk and has no control.
The SABC in many instances may not have any incentive to help process a claim on behalf of a producer, their employees and/or contractors as the SABC’s overall discounted insurance arrangement could be adversely affected by any such claim and more importantly, the SABC has not personally suffered any loss. It should be noted that the SABC’s current Terms of Trade have several onerous indemnities to avert any risk which the SABC may be exposed to and accordingly the IPO is of the view that there is a low risk to the SABC.
Also producers sign all contracts with cast, crew and suppliers. In the event that the SABC defaults on insurance – the producer is 100% liable to all its contractual obligations and thus sue-able. So if a person is hurt on our set, we are liable. If the SABC insurance defaults – we have no recourse as we are not the primary holder of the policy.
When the SABC insurance office does not manage paperwork or flow, we are vulnerable – it is an individual’s word that they submitted, etc. It is untenable to have a hands-off relationship with the insurer.
For as long as the risk lies with the producer, the more significant the risk, the more prejudicial the possible outcome to the producer in the event of non-payment of a claim.
Also, there is a concern around turnaround time from submission of claim to payment of such claim. Some companies have waited for over a year for payment (EG: Moja is currently awaiting payment for an incident that occurred on 10 October 2008. “We filed a claim that day. The SABC was completely non-responsive – not a word, not a mail. We eventually dealt directly with the insurance company. We are still awaiting payment, but there has been some communication this week.”)
The nature of production is that we often need to make last minute changes to schedules to accommodate availability of actors, location problems, weather etc. This requires an extremely flexible and personal relationship with an insurer based on trust and personal track record.
Professional producers build relationships with insurers that enable them to get production matters covered instantly, sometimes in the middle of the night. Claims are also processed within particular parameters which producers have managed to negotiate to minimise their risk and exposure. And if a chosen insurer does not meet such needs, they can be changed.
Managing ones risk is a very personal choice.
Even the banks are not allowed to force a homeowner to use their insurer when they lend you money to buy a house. They can insist you have adequate cover – but they cannot force you to take their cover.
We believe the current approach by the SABC is anti-competitive. However, it has not been our intention to create a forum for conflict – in fact we have now tried to make the SABC insurance work for 2 years. But this has just reaffirmed for us the dangers of the current situation
If the SABC is to insist on its insurers being used, then it should similarly be prepared to assume the risk in the case where a claim is not met within a reasonable time period - 3 months. Also, the SABC must then not request producers to accept all risk for delivery. However, the SABC will argue that it has no control over the production and cannot accept the risk. Similarly, producers will argue that they have no control over the claims procedure and more importantly, if claims are run through the SABC and any administrative error occurs, then an insurer may repudiate a claim and the producer may be liable for the risk where there is a fault on the part of the SABC. This will entail unnecessary, costly and protracted litigation to try to resolve that issue. This creates an untenable situation for all.
It is not only about money and risk but about service levels as well. Producers are often able to secure and make arrangements quickly and efficiently and deal with the claims on particular merits where a globular policy can never provide the same level of satisfaction. This is also a key aspect of insurance arrangements.
As such we request that this matter be discussed at the highest levels as a matter of urgency and that we be allowed to manage our own risk.
NOTE: We are not averse to the SABC having a selection of insurers that are preferential service providers to SABC at a competitive rate and that producers may chose any one of them at such rate This allows us to keep them competitive and responsive. But we must also be allowed to choose our own insurer and pay in any difference in rate.
An example of increased risk to prod co’s.
One of our members had 2 productions for which insurance was provided by SABC. In both cases, they had not received any confirmation or any other documentation from SABC confirming that they were covered.
In one instance, they requested if a presenter had to go for a medical test. The SABC office was unable to help, and instead they referred the prod co to the underwriter, GIB Insurance. While talking to GIB the prod co found out that even though they had submitted their Insurance form to SABC weeks prior, the insurance company had not received any information, and therefore could not confirm that the production was covered.
Note: We believe the micro management with regards things like insurance and how the independent producer manages his risks undermines the producer’s independent status and could lead an inexperienced producer unwittingly to reckless trading.