Video games insurance explained

Valued at more than £7 billion, the games market is big business in the UK. With so much at stake, it’s vital that businesses within the sector protect themselves from the multitude of risks they face from both competitors and consumers. Here, we explore video games insurance and how it can help you safeguard against the unexpected.

• What risks are video games businesses exposed to?
• How does video games insurance reduce risk?
• What does video games insurance include?
• Do I need video games insurance?
• How can I ensure my video games business is properly protected?

What risks are video games businesses exposed to?

All businesses are exposed to risk – including those within the video games industry. The difference is that games development is hugely complex, involving multiple teams and companies dealing with artistic creation, production, distribution, and everything in-between. Ultimately, this can result in complicated claims and counterclaims between numerous parties.

Examples of key risks that businesses within the games industry face, include:

• intellectual property rights;
• contractual obligations with internal staff, freelancers, suppliers, and distributers;
• confidentiality agreements, including non-disclosure contracts;
• global reach, working with international teams as well as audiences;
• end user agreements that set out responsibilities between developers, distributers, and consumers.

The history of the games industry shows how easy it is for claims to be made for a whole range of reasons. For example, in the early 1980s, Universal Studios sued Nintendo because they felt Nintendo’s Donkey Kong was too similar to King Kong. Universal believed that they held the rights to King Kong and the similarities would confuse gamers. Nintendo successfully proved neither of these were true and Universal Studios was forced to pay Nintendo nearly $2 million in compensation.

Another high-profile case in 2010, involved a consumer who sued games maker NCSoft for making a game that was ‘too addictive’ resulting in him playing for up to 11 hours a day. NCSoft claimed their end user agreement meant the consumer didn’t have a claim but a US court disagreed and heard the case, leaving NCSoft to pay the consumer’s legal fees.

How does video games insurance reduce risk?

The experiences of Nintendo and NCSoft both demonstrate how tenuous some claims can be, and how the result can often come down to interpretation. While video games insurance doesn’t take risk away, it can mitigate the effects by ensuring your games business has access to professional advice and funding to protect your interests.

What does video games insurance include?

Like many other business insurance packages, video games insurance combines various products that give you all-round protection, including:

Professional indemnity

Professional Indemnity covers legal costs and resulting damages arising from allegations of a financial loss suffered by the claimant as a result of the services you provide for a fee.

The following are examples where claims can occur:-

• Disputes in specification versus the delivered product/service
• Breach of contract
• Unintentional breach of intellectual property
• Defamation/libel and slander
• Content liability
• Project delays
• Loss caused by player replicating elements of your game and causing injury
• Acts of freelancers and subcontractors
• In game purchases
• Reputation and brand protection

Cyber insurance

You are more likely to suffer a cyber loss than a fire or theft at your premises. Companies within the video games industry generally hold significant amounts of data including player information and confidential commercial contracts. A third-party cyber policy covers claims from third parties as a result of data being lost or stolen. The costs alone are significant, especially in overseas territories such as USA and Canada.

Cover can be extended to include cover for first party cyber i.e. the costs you incur as a result of a cyber event. This could be the cost of forensic IT specialists, ransom demands, lawyers to notify customers of the breach, and any subsequent loss of revenue.

Any company that handles data of some form should have cyber insurance.

Public and products liability

Covers injury or damage, and associated losses, to third-party persons or property caused by your business, including any tangible products it sells or distributes.

Employers’ liability

Protects against claims from employees for injury or illness, where your company has been negligent, as a result of employment by your business.

Other features to consider

In most cases, you’ll be able to add other features to your video games insurance policy. What’s right for you will really depend on the nature of your business. For instance, key person insurance can reduce the loss if an essential member of your team can no longer work. Management liability insurance is recommendable for most businesses as it protects key personnel from claims made against them directly.

Companies in the video games industry could also benefit from taking out credit insurance, which protects businesses from financial loss if a customer is unable to pay a debt owed or is insolvent.

Do I need video games insurance?

If you work in the video games industry in some capacity, then yes you do need insurance. Whilst legally the only insurance you are required to have is employers’ liability (if you have employees), not having insurance will leave your business exposed to the cost of potentially claims and legal fees for any number of issues.

If you’re not sure if video games insurance is right for you, here are examples of the types of businesses within the industry that could benefit:

• Game developers
• Music and audio
• Production
• Quality assurance testing
• Translation services
• Publishers
• Distributers

How can I ensure my video games business is properly protected?

No one knows your business as well as you, but when it comes to looking at the risks you face, it helps to gain objective advice from a specialist broker. Discussing your needs can also ensure that any policies you do have, are up-to-date and robust.

Working with UKIE and TIGA, our video games insurance has been developed to provide a policy that tackles the unique risks that arise in this sector. By using a specialist broker, you can access their expertise and experience to make sure that your business is properly protected, so that you can focus on delivering on your objectives and developing your company.

For more information about what a video games insurance policy should look like for your business, contact us on 01223 445452.