Following the astonishing success of PokÃ©mon GO, Jim Wrynn and Wendy Shapss explain why augmented reality is making the
insurance industry's head spin.
You see them on the street, in shopping centres, in parks, playgrounds and sometimes on your front lawn.
PokÃ©mon GO players of all ages have been engaging in a fantastical scavenger hunt using augmented reality (AR), which overlays virtual images onto what you are seeing in real time. The magnitude of this global phenomenon is staggering -- the game was downloaded an estimated 100 million times in 72 countries in little more than a month.
The insurance industry has a stake in this phenomenon. AR games present both familiar and new risks to the public and game developers. Experts are wondering: Are we ready to meet the liability demands that are arising from this new technology?
The first and most obvious risk is related to personal safety. In just the first few weeks after PokÃ©mon GO's release, a rash of accidents involving gamers filled the news. Most of those accidents were fairly benign -- gamers who tripped or fell off a bike or skateboard while hunting characters, for example. Some were more unnerving, however, like the two players who tumbled over a cliff in Encinitas, California (they survived with minor injuries).
For what it's worth, the game's 'trainer guidelines' specifically request that users do not trespass and "remember to be alert at all time [sic] and stay aware of [their] surroundings". But do all gamers read and follow these guidelines?
Anyone who receives medical treatment as a result of an injury sustained while playing PokÃ©mon GO will most likely submit a claim under his or her health insurance policy. That is, unless other coverage is primary, such as no-fault coverage under an auto policy or potentially workers' compensation coverage. Gamers who cause injury or damage to others while using the app should also be covered for personal liability under their homeowners, renters or auto insurance policies.
But the issue is not so straightforward if the injury happens at work. What happens if the gamer is playing on the job and becomes distracted and is injured? Will the employer's workers' compensation policy provide coverage? What if a third party is injured by the employee/gamer who was distracted by the app while working? Would the employer's liability policy provide coverage?
The issue is even murkier if there is a cyber breach, the user's data is stolen or the gamer's personal information is used in a way that was not intended. While the option of adding identity theft coverage to a homeowner's policy is available in most states, not everyone has this coverage. And even for those who do, it's unclear whether the coverage is sufficient to cover the costs, expenses and damage that may result from the dissemination of the information.
Even with a disclaimer about responsibility, companies that develop, manufacture, market, sell and/or distribute AR apps should be prepared for potential liability issues with appropriate coverage. Issues include 'trespass', where the app leads a gamer to venture onto another's property without permission; 'attractive nuisance', where the developer knows, or should know, that it is creating a condition on the property that would likely cause a child to trespass; and 'cyber liability', which covers damages that could occur as a result of the improper use of the personal data that the developer acquires.
Typically, companies will have a variety of liability coverages to meet the necessary needs. But the cutting-edge nature of AR apps suggests that companies must pay careful attention to the provisions, limitations and exclusions in their policies to understand what is and what is not covered.
More questions on the horizon
The AR market is expected to generate nearly £100bn in revenue by 2020. That kind of dangling carrot, plus the ability to exploit a technology that is becoming more versatile and inexpensive, means we can expect more AR games rushing to market in the next few years. And with that will come more questions for consumers and the insurance industry.
Jim Wrynn and Wendy Shapss are senior managing directors at FTI Consulting.
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting Inc, its management, its subsidiaries, its affiliates or its other professionals.
What is augmented reality?
Augmented reality overlays virtual images onto a person's real-time view.
Why you should read this Article?
Augmented reality games present new risks that will impact the insurance industry. Game developers, employers and insurers need to understand the liabilities that AR games present.