The movie industry today is big business, with ever-larger sums riding on the backs of what seem like fewer and fewer franchises and their associated stars. The article in the url below indicates the extent to which the movie studios understand this and are seeking to monetize the risks involved:
"The death of Carrie Fisher, a much-loved actor in the 'Star Wars' movies, left a hole in the force for fans. It may also burn a hole in the pockets of underwriters, syndicated under Lloyds of London. They may have to fork out as much as $50m to meet Disney's claim for its loss. The studio, which owns the sci-fi saga, had wisely taken out so-called contractual-protection insurance (CPI) in case death thwarted a contractual obligation: in Ms Fisher's case to film and promote future 'Star Wars' episodes."
I have discussed the social and ethical issues surrounding the ability of firms to insure the lives of their employees before (see Strategic CSR – Employees). What is interesting in the article below is the extent to which it demonstrates movie studios rely on specific individuals:
"When Paul Walker, an actor in 'The Fast and the Furious,' a series of action movies, died in 2013 while filming the seventh instalment, Universal Pictures had to spend considerable effort (and dollars) to make his on-screen persona live on. This included hiring body-doubles and digitally inserting Mr Walker into the movie with hundreds of computer-generated images."
Beyond a basic functional ability, franchise movies (and popular sports teams) become associated with specific individuals, faces, voices, which are hard to replace. While companies understand this, it doesn't mean it is always easy to quantify the value of such individuals. CPI has been developed by the insurance industry to deal with this problem:
"… the value of a film star to a studio, or a striker to a football club, … depends on all sorts of things, especially timing. This is where contingency insurance, such as CPI, comes in. Unlike a life policy, how much of the $50m Disney receives depends on how it now calculates and justifies the losses caused by Ms Fisher's death. This could include, for example, her role in boosting sales of storm-trooper figurines."
While CPI establishes a process (and, over time, precedent) for valuing the life of someone who is essential, it is less easy to pinpoint the extent to which such quantification eats away at our moral foundations. In spite of knowing that a firm's investment in an employee (particularly a star actor or athlete) constitutes an asset that should be protected, it still feels as though the company is taking something that doesn't belong to it. This is especially so when the quantification of the employee's future value remains subjective and ambiguous. Perhaps this should be irrelevant, but this feeling is enhanced if the employee has not taken out life insurance themselves. While this may not matter or apply in Ms. Fisher's case (or of other stars), increasingly firms are taking out insurance on more and more of their employees, some (many?) of whom cannot afford to take out life insurance themselves. In doing so, firms use the criteria, not that the employees are essential to the business, but that it would be inconvenient to replace them. While I understand that the firm pays the premium levied by the insurance company and this is a risk/reward transaction somewhat removed from the individual themselves, what happens when a badly written policy builds-in incentives for firms to profit from the employee's death? Additionally, should the firm be allowed to benefit more than the employee's family from the event? To what extent is an employee's life something that can be hedged by the firm?
"With rock stars remaining on stage into their dotage and long-running sequels one of the surest ways to make money in Tinseltown, the risks of losing a 'key human' (or on occasion animal) are growing. That creates business opportunities for insurers, so long as they remain prudent and don't become star-struck."
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January 7, 2017
Late Edition – Final