The World's First Virtual Insurance?

Posted on Jul 12, 2011 by Sergio Ulloa (G+)

Worried that someone could hijack that jewel-encrusted battleaxe you worked tirelessly for in World of Warcraft, or sabotage your long-standing account on EVE Online? Those of you spending an inordinate amount of time playing massively multiplayer online games may soon have a way to protect your hard-fought virtual assets from loss. In what could be the start of a new trend, a Chinese insurance company has teamed up with a videogame developer to launch the world's first "virtual property" insurance to ensure the intangible liabilities of its online game players. Virtual property can be defined as any asset collected or awarded to a player in an online game world, such as currency, land rights, weapons, abilities, characters and other goods. These all can be used, traded, exchanged and sold within the context of the game and thus can hold some genuine 'value' to the player. Difficulties however can arise once these virtual goods attain a sufficient value in the real world, such that players would barter in actual currency to obtain the virtual property. When this occurs, players may require real world legal intervention to solve disputes with other players and perhaps even the games developers themselves. There are still many questions surrounding the rights of virtual property but there exists a demand for services right now to provide security to those engaged in these online marketplaces. This past week, Beijing-based Sunshine Insurance Group Ltd. announced a strategic collaboration treaty with online game designer GAMEBAR to provide a virtual insurance service for the hotly anticipated 3D multiplayer online game "Ju Xian" expected later this year. The game has been in development for 3 years and aims to provide a massively multiplayer online battlefield experience for the eager Chinese online gaming audience. Within Ju Xian, players can buy into a subsidiary currency, through which various digital items, property and weapons are purchased and sold. An insurance policy, taken out by the player for a small monthly premium, would cover such exchanges in the event of technical error. For example, if a player purchased the 11-yuan wolfram-steel sword offered in the game and then the item was lost, compensation would be provided. This basic liability insurance is also available to the operators themselves and will help to reduce GAMEBAR's operating risks, covering select damages resulting from player disputes over the loss of virtual goods. Furthermore, the game designer hopes that providing additional security will encourage more online micro transactions and commerce. Lian Zizhi, vice president of Sunshine Insurance Group, explained that their virtual product insurance would closely resemble traditional liability coverage policies currently available on the market used to insure property. The insurer is looking forward to working with online game developers to work out the best mechanisms to ensure the interest of their game players and themselves. "Basically it is a kind of liability insurance and has no big difference from common liability insurances. Such insurance comes into effect when the players lose their equipment and the operators concerned are responsible for that," Lian Zizhi told CCTV. Sunshine Insurance further added that the Copyright Protection Center of China may become involved to help determine the actuarial value of virtual property claims. The state organization could be introduced as an independent videogame oversight body, supervising game data in China and providing analysis over future online compensation standards. China has been slow to develop laws that distinguish virtual property and the problems therein. A number of East Asian countries now recognize virtual property as interdependent assets that are moveable in cases of fraud. Both South Korea and Hong Kong meanwhile have dedicated police departments that investigate in-game and technology crime. According to China Internet Network Information Center, over 300 million people engage in online gaming, just under two-thirds of the entire Chinese internet user base. Many of these online games now incorporate massive virtual worlds with real, functioning economies, in which players can cash in their virtual goods for real money. These virtual societies also manage to mirror some of the problems of our own, with many players occasionally made to suffer economic losses as their accounts or equipment are stolen or lost. Game developers are the most concerned about this development as more gamers are electing to seek justice through courts over stolen weapons and items accumulated in their games. In 2003, a gamer in China who had his 'Red Moon' game account hacked and lost all his credits, took his case to court and demanded compensation from the game company. The court ruled in the player's favor and since the cases have been piling up. Disputes over virtual property have even impacted divorce hearings in China. In December 2010, a wife attempted to claim a share of virtual assets from her former husband because they had shared the same game account. The two originally met through an online game although marital life fast became a struggle as both parties blamed each other for being too lazy to do housework. The Beijing court approved the divorce but denied the claim. Occasionally virtual theft and fraud has lead to real-world violence as well. A Shanghai-based gamer was sentenced to life in jail in 2005 after stabbing his friend to death in a fit of rage for selling off a rare weapon he lent to him in "Legend of Mir 3" for 7,200 Yuan. Perhaps the existence of some form of virtual insurance would have prevented such tragedies occurring in the past. There are still many issues to resolve when actions in online virtual game worlds impact on reality and the Chinese insurance market is well poised to be at the forefront with solutions. The country's appetite for online gaming is only matched by its overall trade and industry potential. According to Swiss Re's latest Sigma study, China posted a significant 26.2 percent growth in 2010 premiums, and is poised to become the second-biggest insurance market within a decade. This growth will help spur both legal and commercial innovations in handling future virtual property issues. How game developers and publishers react to more regulatory involvement is yet to be seen but the demand for increased security for your online life is already here. Who is to say that gamers who are prepared to purchase virtual goods with real world cash would not react favorably towards some new form of insurance protecting their time, online status and financial investment? The millions of people logging onto popular titles such as World of Warcraft and Farmville each moth present a real opportunity for the international insurance industry. Insurance Companies Mentioned Sunshine Insurance Sunshine Insurance Group Corporation was founded in 2005 by a conglomerate of state-owned Chinese enterprises including Sinopec, Chinalco and China Southern Airlines. The company is headquartered in Beijing and recorded 5.8 billion yuan (US$ 4 billion) in premiums last year, ranking as the eighth largest insurer in China. Swiss Re Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life, health and special lines - such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.