2 August 2023

Emerging Risks For Game Developers

It is now thought that there are more than 3bn gamers in the world and the games sector has seen incredible change since its very beginnings.

Gaming development is fast paced, whether games are born out of new ideas or iterations of others, one great idea and execution can change the life of a gaming developer. But with the breadth of development and creative options available to makers, comes the multi-faceted business and game-related risks associated with the success, and failure, of the game and the business. 

For the purposes of this post, I will keep the risks we are talking about related to those of the game.

Established risks

Historically, games that followed the creative processes involved in the production of a video game were largely thought to relate to risks exposures such as breach of contract, missed deadlines and intellectual property breaches.

Professional Indemnity for Game Developers and Intellectual Property Insurance would provide a vehicle to insure against these risks.

There have also been attempts to hold game companies liable for violent acts committed ‘in the real world’ with allegations that a particular game has caused or contributed towards that act of violence. Although there seems to be little academic consensus as to whether there is a causal link.

Outside of the risks linked to the game itself, a game developer will have the standard business operating-related risks of:

  • Protecting the property of the business.
  • Protecting the personal liability of its Directors, Officers, and Senior Managers.
  • Claims arising from investor relations turning sour.
  • Claims arising from employment practices.
  • Claims arising from cyber exposures.

Emerging risks

Firms who look to deliver a successful game for their community will look to create a more immersive and user-centric game, often creating sequences and gaming strategies that keep users in their chairs for longer.

Whilst this premise is not new, the deployed technology and tactics have evolved and as a result, created new and emerging risks.  

An emerging risk is: “a risk resulting from a newly identified hazard to which a significant exposure may occur, or from an unexpected new or increased significant exposure and/or susceptibility to a known hazard”.

But where is this apparent in gaming development?

Virtual Assaults

Virtual Assault incidents have taken place in various online environments before, for example, in Meta’s Horizon World a beta group member was reportedly groped by a stranger.

It’s not the first time a user has been assaulted in VR or an online environment —nor, unfortunately, will it be the last. But the incident shows that until companies work out how to protect users, the gaming industry must be made a safe place for everyone.

Whilst it is not my place to lay blame, in fact, there have been many discussions as to who is responsible for making sure users are comfortable whether it is the game operator or for users to self-Police, the fact remains that the game developer will at some point be caught in the crossfire and therefore will need their insurance policy to kick in and help them.  

Addiction Litigation

Addiction litigation has existed for many years – look to opiates and tobacco for established examples.

Class action lawsuits have already been brought against game developers, with the most well-known case brought by American gamer Craig Smallwood against the makers of Lineage 2, after he spent 20,000 hours across 5 years and 3 user accounts playing the game.

Since then, high-profile games including Fortnite, have had allegations made against them that the games have been ‘deliberately designed to be addictive’.

The problem is so profound, and legitimate, that The World Health Organisation recognised “Gaming Disorder” as a mental health condition in 2018.

Addiction Gambling

Gambling is a problem in many walks of life but has recently entered the virtual and gaming world.

Loot boxes are featured in some video games that are part of a wider market for in-game purchases. They contain randomised items in which the player does not know what they are going to get until they have opened the loot box – this element of luck, has been classed in some territories as gambling.

Whilst I believe the tactic was initially used to increase users' time on the game, the effects it has had on children and adults have meant the UK Government stepped in by asking for a call for evidence, which it published in July 2022.

Since then UKIE Technical Working Group has published 11 principles designed to meet the two key objectives in the Government's response.

Ultimately, the aim of this is to make sure players can enjoy video games responsibly and safely. It remains to be seen what the consequences of not following these principles will be, but given the media attention these principles were given, you can expect them to be unforgiving.

Algorithm social bias

Inequality and unfairness have complex causes, but bias (whether it's known or unknown) in the decisions that developers make is often a key aspect.

However, decision-making is currently going through a period of change. For now, businesses and organisations are making decisions whilst considering their corporate responsibility. For the game developer, that means developing in a responsible manner, that considers race, gender, and cultural differences.

In creating games, it can be too easy for people to allow subtle, unconscious biases to infiltrate leading to accusations of an allegation of algorithm or social bias.

Your insurance programme

Game companies face wider risks and exposures than ever before, and it is imperative that the business has a robust insurance programme to provide appropriate protection.

Working with a broker who understands the industry and a game developer's business is key to creating that insurance program.

We are a trusted adviser for many UK-based game developers, helping them navigate this sometimes-complex arena for over a decade, and we can help you too!

Contact me for a welcomed confidential review of your insurance programme.

0113 323 1042

Article by Mark Philmore ACII, Chartered Insurance Broker – Client Director.