Why travel somewhere when you can just pop on a virtual reality headset and be immersed in that world instead? That is the promise of the so-called “metaverse.”
Some companies may be overselling the technology and the role the metaverse promises to play in people’s day-to-day lives, but, even still, it is a good bet that at least some of our lives in the
future will be lived in that virtual space.
Some early adapters are already embracing it, and some businesses are hedging their bets by spending millions of real-world dollars to put in claims on what might eventually turn out to be valuable virtual real estate.
With those initial moves into the virtual world, the list of potentially insurable risks in the metaverse can be long. Hackers could take control of a user’s account, or lock a business owner out of their virtual storefront.
Businesses that can’t conduct transactions may come looking for protection from business interruption insurance policies, or potentially more.
Anyone keeping the private information of another person could have some exposure if that data gets breached.
And anything valuable is at risk of being stolen by someone trying to make a quick buck at their expense.
So, the short answer is that with money comes risk, and with risk comes insurance. While there aren’t any real metaverse insurance policies to refer to today, this might be the time to start exploring how the metaverse might find its way into insurance policies in the near future.
Business insurance in a virtual world
The first reality businesses are going to have to confront when they begin prospecting for metaverse-based property is that there isn’t just one metaverse. Many companies are looking to make their space the default virtual space. That means businesses need to buy into many metaverse platforms, some of which will inevitably go the ways of Friendster or Myspace.
Most business insurance policies don’t say a word about the virtual space, but a good argument could be made that “all risk” or “comprehensive” policies may need to start thinking about underwriting and claims coming from the meta space.
The first policy most companies buy is a business owner’s policy, or a BoP. These don’t tend to protect property the businesses’ property, though, and instead protect against liability.
So, if a company ends up inadvertently spreading a virus that takes down the cyber town, a BoP may be where they turn for coverage.
A BoP might also help if the company’s software caused physical damage to a user – say a company developed a game for the metaverse that started causing users to have seizures or migraines, or to trip over a coffee table, or fall out of a chair. The liability portion of the BoP may step in here. Policyholders probably would be hard-pressed to get their insurers to cover “mental only” losses, though, so, if someone says the software causes stress or anxiety, a successful claim may be harder to prove.
Business property insurance does promise to keep the owner’s stuff safe, but now the conversation quickly needs to turn on what is the definition of “property.”
From an insurer’s point of view, property damage tends to be considered to be physical damage to tangible things. Many policies exclude “electronic data” as tangible property, so some specific language or riders may need to be developed if a business owner wants to be protected from a hacker vandalizing a virtual storefront.
Typical polices do tend to include some language about cybercrimes, especially data breaches and ransomware attacks, but it is unclear if that is enough to protect the millions being spent in the virtual worlds.
See also: Beware the Metaverse
Individual users also need to be thinking about their insurance needs once they slip into the virtual world.
Much like with the business owner’s policy, the question of who would be on the hook if an individual’s private property is damaged in the metaverse would come down to what that person’s homeowner’s insurance policy says. Many homeowner’s policies specifically exclude digital assets, and others require specific riders to get coverage.
So, what would happen if a hacker gained access to an avatar and drained its inventory of all the NFTs the user so lovingly collected? Theft is usually covered by homeowner’s policies, but whether that protection follows the policyholder into the metaverse is unclear.
One place where homeowner’s policies would likely shine is in defamation. Because homeowner’s – and business owner’s polices, too, for that matter – don’t tend to specify where the defamation or advertising injury has to happen to be covered. So, if someone gets sued because they flamed another person in the metaverse and their comments crossed the line into libel, their real-world policies should still stand in to protect them.
Deciding who needs coverage in the metaverse in many ways comes down to who is at risk and who holds the liability.
Is it the businesses operating on the metaverse platform at risk, or does the platform itself hold the liability? Or is the whole metaverse going to be “user beware”?
What do the terms of service say? And are they enforceable in a court of law in every jurisdiction?
Borders also need to be thought of. In insurance terms, that is the coverage territory, which U.S.-based policies tend to specify as the U.S., Puerto Rico and Canada, but how would these policies handle a server housed in Seychelles, or Belize or China?
Many of these details are going to have to be hammered out by underwriters, legislators, in corporate board rooms, in courtrooms or in some combination.
Emerging technologies bring out the prognosticator in everyone. And one of the most certain things is that most people will get it wrong in the early days, but, if there is value, it will find a way to bubble to the top.
And if it is valuable, it is worth insuring.
The original version of this article ran at insurancequotes.com.