IPL 2020: With no insurance cover against COVID-19, Star India and cricketers stare at massive losses

It's the time of the year when cricket lovers from across the country would be hooked on to their television sets to watch their favourite Indian Premier League (IPL) team play.

“My favorite team is Chennai Super Kings (CSK) and I try not to miss their matches,” said one such fan, Feroz Khan hailing from Chennai.

But Khan, like many others, has been disappointed with the league this year getting postponed to April 15 in the wake of COVID-19 outbreak. And now, there is a high probability that it will be suspended for the year.

While IPL fans will have to just wait until the next year in the case the league gets canceled, the IPL stakeholders will have a lot to lose as they have no insurance cover for such an event.

“IPL stakeholders tried taking insurance cover for pandemic but it was not approved. Hence, the insurance covers for the 13th edition of IPL excludes coronavirus," Rajat Mishra, a Supreme Court lawyer and legal & risk management expert, told Moneycontrol.

With no insurance protection, the broadcaster Star India could be the worst hit.

“The biggest possible loser is going to be the broadcaster, Star TV. They have already paid out Rs 1,600 crore to BCCI. And none of the Rs 2,100 crore of inventory booked will now come in," said Sandeep Goyal, Chairman, Mogae Media, a Mumbai-based marketing and communication agency.

Experts had estimated Star India's ad sales to hit or even breach Rs 3,300 crore for this edition of IPL. Nearly 70 to 80 percent of the league’s ad inventory had already been sold.

However, in the current situation Star has a lot on the line despite having insurance cover.

Mishra explained that one cannot take health insurance after falling sick. Similarly, insurance policies had started excluding the pandemic cover from the start of January. And Star booked most of the ad inventory in mid-January. So, Star’s ad revenue is not protected against coronavirus, he said.

Along with Star, the cricketers will suffer if the IPL gets suspended.

“The players will be big losers. It is unlikely that any insurance would cover the cancellation of IPL for them. Non-participation due to injury would be valid under insurance but event cancellation is highly unlikely,” explained Goyal.

For IPL, insurance covers include event insurance, professional indemnity, commercial general liability, kidnap and ransom cover, D&O (Directors and Officers liability) for IPL owners, business interruption, medical and accidental covers, said Mishra.

BCCI though, Goyal said, is a clear winner despite no IPL this year.

How? “The single largest source of revenue for the BCCI is broadcast fees. As per the BCCI-Star contract, Star is to pay BCCI 50 percent of the annual amount (Rs 1,600 crore in this case) 30 days before the start of the IPL every year. Star had paid that out even before the postponement to April 15 was announced. BCCI would also have collected 50 percent of sponsorship money from all other central IPL sponsors like Vivo, or Ceat the time-out sponsor, etc. So, BCCI has over Rs 2,000 crore in the pocket without a ball being bowled,” said Goyal.

He also thinks that franchises do not have much to lose.

“The franchises have had some standing costs of support staff. No IPL means no payouts to players. The franchises will nevertheless receive 50 percent of their annual share of broadcast revenues from BCCI. Overall, they will not end up in the negative territory,” he said.

Delayed risk management in India

Talking about risk management, Mishra said, in India that is the last thing one considers. He also cited Wimbledon’s example.

The Tennis tournament which stands canceled due to coronavirus is protected against the virus outbreaks such as COVID-19.