Insurance for Augmented and Virtual Reality

If you have at least a passing interest in technology, you’ve probably heard quite a bit about virtual reality (VR) and augmented reality (AR) in recent years. The metaverse promises to use VR to change how we work and socialize, while gaming and meetings have already provided well-known use cases for this technology in the present day. Meanwhile, AR is integral to both mixed-reality headsets and everyday smartphones.

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But these technological advances come with some risks: it’s no coincidence that VR-related home content insurance claims exploded by 31 percent in 2022. If you’d like to learn how virtual and augmented reality intersect with insurance coverage, you’re in the right place. Keep reading for our complete guide to virtual reality, augmented reality, and the insurance needs linked to these emerging technologies.

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While virtual and augmented reality are closely related and can even overlap somewhat, they are fundamentally different. To fully understand the implications VR and AR have for the insurance industry, you’ll need to know what makes these technologies different—and what similarities they share.

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^{Virtual reality}

As its name suggests, virtual reality is designed to immerse users in a wholly digital world. The device that makes this possible is a headset—a head-mounted stereoscopic display capable of tracking a person’s head movements. When VR users wear a headset and hold a pair of motion controllers, they can interact with virtual objects and environments as intuitively as they can in real life.

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While virtual reality is considered a cutting-edge technological development in its current form, primitive VR headsets have been around since the late ’60s. These products were used primarily in enterprise settings for the next several decades. Public interest in virtual reality boomed in the ’90s thanks to the arrival of consumer-grade headsets, but cooled for much of the 2000s. In the early 2010s, interest began to pick up again with the introduction of the Oculus Rift and other “modern” headsets.

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Right now, much of the discussion surrounding VR is related to the “metaverse.” While this term is notoriously tricky to define, it broadly refers to a futuristic version of the internet composed of one or more virtual worlds. These worlds may or may not be exclusively accessible through VR, but the technology’s emphasis on immersion makes it ideal for this use case.

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Even without the metaverse, VR has found a comfortable niche in today’s tech industry. This technology’s unmatched sense of presence makes it a natural fit for enterprise applications, especially when training new employees in high-risk careers (including surgeons, pilots, and firefighters). Meanwhile, VR allows students to travel through space, under the sea, and to world-class museums. Of course, the immersion associated with virtual reality also makes it perfect for gaming and other forms of entertainment.

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^{Augmented reality}

Like virtual reality, augmented reality allows people to interact directly with computer-generated content. However, VR focuses on creating entirely virtual environments for people to explore, and AR seamlessly overlays digital images into the real world. Today, augmented reality technology is used in many of the same fields as virtual reality, including business, education, and entertainment.

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While augmented reality is often associated with headsets similar to those used for virtual reality, this isn’t the only way this technology has been utilized. In fact, even entry-level smartphones offer augmented reality capabilities. One of the most prominent uses of this tech is the popular mobile game Pokémon GO, where players can use their phones to catch 3D models of the titular creatures overlaid onto their real-world surroundings.

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Augmented reality’s ability to overlay data onto the real world makes it another highly viable training option in enterprise settings. AR can also be used to assist in:

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• Equipment repair
• Inventory management
• Remote assistance
• Architectural planning
• Product visualization

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Mobile and headset-based AR applications have both been put to good use over the years, but these are far from the ultimate form factor for this technology. Instead, much of the buzz surrounding AR is tied to the development of “smart glasses”—wearable computing devices shaped like a pair of eyeglasses. Google has been experimenting with smart glasses since the introduction of Google Glass in 2013, and rumors have indicated that Apple might be working on a similar product. But while widespread adoption of devices like these could be years away, it’s safe to say that AR has already had a considerable impact on the world in its current form.

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By now, you should have a basic understanding of augmented and virtual reality. That means you’re ready to start looking at how these technological advancements are changing the insurance landscape right now—and how they could lead to even more significant shifts in the future. Some major VR-related risks that could lead to losses among people and enterprises alike include:

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^{Property damage}

Admittedly, many of the insurance risks tied to AR and VR are somewhat speculative in nature since these are still emerging technologies. That said, you don’t need a time machine to see how virtual reality can be linked to property damage. Incidents like the ones described in this article’s opening paragraph aren’t going away any time soon. Instead, they could become even more common as time goes on.

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Meanwhile, understanding augmented reality’s connections to property damage is as easy as looking back to the summer of 2016. At that point, the aforementioned Pokémon GO was in its heyday—and so were news stories about car accidents caused by people attempting to play the game while driving. 

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Augmented reality incidents like these are alarming enough in isolation, but it’s important to remember that they were caused by people playing a single game using a phone-based version of AR. On the other hand, imagine what could happen if smart glasses eventually become ubiquitous. In that case, distractions from overlaid data could become a leading cause of car crashes and other types of property damage.

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In addition, if your business stores or sells VR headsets, then you need to make sure you are covering the property from things like theft, fire, or other physical perils.

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^{Health issues}

No new technology is perfect, and that certainly applies to virtual reality. While VR headsets can create incredibly convincing spaces, virtual motion that isn’t accompanied by physical movement can trigger all-too-real nausea among users (especially if they haven’t had much VR experience). People affected by this sensation could find it difficult to drive or perform complex workplace tasks for a while afterward.

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By its very nature, AR is less immersive than VR—this technology focuses on adding virtual elements to the real world, not creating entirely new environments. Because of that, motion sickness is much less of a concern for AR users, even when they are using headsets instead of smart devices. Still, it’s important to remember that the distractions created by this technology could lead to injury or death if users aren’t careful.

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In addition, when a customer is using your VR or AR device they could end up smacking their head or doing some other damage to their body. We've tried VR a few times and it's pretty easy to get ahead of yourself and run into something in the... real world.

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^{Information security/privacy risks}

For augmented reality technologies to function correctly, they need constant updates on the user’s surroundings. That means these devices must have access to a great deal of information about the people using them and the environments they are being used in. Since cybersecurity is already a hot topic, it’s easy to see why AR application providers need to be careful with the data they’ve been trusted with—and the issues that could arise if they don’t sufficiently protect this information.

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On the other hand, VR devices do not need quite as much information about the spaces where they are being used. Still, cutting-edge headsets have sophisticated tracking technology and can even measure biometric data like people’s finger and eye movements. That data must also be kept safe by hardware and software companies.

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^{Virtual harassment}

Cyberstalking has been an issue online for years, but the metaverse could allow this problem to get worse in a disturbingly literal new way. Some VR users (especially female VR users) already experience harassment in virtual social environments. While this is currently limited by the number of people actually using VR for social interaction, any increase in this technology’s popularity could come with an uptick in harassment.

As you can see, quite a few potential risks are associated with virtual and augmented reality. And wherever there are risks, there are more reasons to cover that risk with insurance coverage. These risks could be necessary for a business or an individual.

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Some forms of insurance that could be relevant to a business designing, distributing, or selling VR or AR as follows:

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^{Product Liability Insurance}

Your customer could injure themselves while using the VR and AR. Whether the smack their head into a wall, or claim loss of eyesight, there's a significant exposure in regards to bodily injury. Product Liability Insurance protects your business if you are sued due to a defect or loss related to your product. It also covers Product Recall and expenses related to a recall.

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Your Product Liability and Recall policy is the backbone to your insurance portfolio.

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^{Cyber Insurance}

While it’s not nearly as well-known as the other forms of insurance on this list, cyber insurance is very real. This type of insurance can cover policyholders if they find themselves dealing with anything from cyberbullying to data breaches. Since VR and AR technologies are tightly connected to these issues, people using these devices should seriously consider the possibility of applying for cyber insurance.

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As of 2023, cyber insurance isn’t as standard as some types of insurance, but it would be shortsighted to say this will always be the case. After all, online socialization is becoming more and more common these days, and the metaverse could easily supercharge this trend. If that shift comes with a corresponding increase in digital harassment and data leaks, expect cyber insurance to take off in response.

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^{Technology Errors & Omissions Insurance}

As soon as your technology directs a person to do something is the moment your business has an E&O exposure. Perhaps you make a VR headset that connects to a game where people are moving around. Or you make an AR product that provides education information that a person could use in the real world. These claims could fall into an E&O policy.

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A Technology Errors & Omissions policy can also protect your business from lawsuits related to other parties you do business with. This may include the following:

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• Manufacturers
• Software Developers
• Hardware Developers
• Information Technology Providers
• Consultants

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If your business creates, designs, or manufacturers a technology product, then this coverage is essential to your risk management portfolio.

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^{Life insurance}

For individuals using AR and VR, it's important they have coverage protecting themselves, their familiy and friends, and anyone else who comes into their home. Life insurance and home insurance are valuable tools if someone is injured while using the device.

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Games like Pokémon GO are far from the only use of augmented reality in today’s world, but they’ve led to a handful of tragic deaths among players. While VR mishaps are even less likely to cause death, that situation isn’t entirely unheard of, either. In either case, life insurance can provide the family of the deceased with some financial protection.

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It’s important to note that there are two primary forms of life insurance—term life insurance and accidental death and dismemberment (AD&D) insurance. Both of these insurance types should cover accidental deaths like those caused by VR/AR accidents. But the similarities stop there—AD&D policies won’t cover deaths from disease, drug overdoses, suicide, or drunk driving (assuming the insured party was drunk).

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^{Homeowners insurance}

The thought of dying in a virtual reality-related incident can be alarming, but that doesn’t mean this situation is all that likely. Even if something does go wrong while you’re using a VR headset, you’ll probably just damage some items in your home. Of course, just because a risk isn’t deadly doesn’t mean you shouldn’t be insured against it.

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That’s where homeowners insurance comes in—along with coverage for the home itself, these policies can also include personal property coverage. With this coverage, a policyholder will receive a payout if their belongings are stolen, destroyed, or damaged. That’s true whether the cause of this damage was a house fire or an overly-engaging round of Beat Saber.

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^{Accident Insurance}

When you sign up for accident insurance, you’ll get financial assistance in the event of a qualifying unintentional injury. This type of insurance can help people pay for everything from larger expenses like hospital stays and ER treatment to smaller costs such as lodging and transportation.

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Accident insurance is unlikely to cover minor scrapes and bruises from virtual reality use. Even so, this type of insurance could certainly cover larger injuries sustained while using these technologies—especially in situations like those caused by playing AR games outside.

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Insurance rates can vary based on various factors, including the state where a policyholder lives. With that said, here are the average monthly premiums for the types of coverage listed above:

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• Product Liability Insurance: $500 - $5,000
• Cyber Liability & Data Breach: $250 - $500
• Technology Errors & Omissions: $100-$300
• Accident insurance: $150 - 250
• Life insurance: $25 - $50
• Homeowners insurance: $100 - $200

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Again, these are merely national monthly averages for these types of coverage as of 2023. To know exactly how much you can expect to pay for this coverage where you are, you’ll need to do some research of your own.

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Get in touch with your VR and AR insurance advisor today to learn more about pricing.

The process to get insurance is an easy and straightforward process. You get us the information we need to engage insurance providers and we'll supply the best possible quote(s). We're also real people that probably live in your city, and we value relationships, so meeting in person is always an option. At the end of the day, our job as brokers and advisors is to educate you on what everything means. It also helps us to understand your business and insurance needs, so we can get underwriter comfortable with quoting. We'll help you understand insurance and risk management practices, and be there for you as the business grows.

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Some traditional businesses can move through the process faster as a lot of underwriting is supported by artificial intelligence, but most policies today will be reviewed by an actual person. We have decades of experience working with the underwriters at each insurance company, and pitch your business to each of them. We work with and for you.

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The standard process to produce quotes for your business is as follows:

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1. Advisor Introduction: this can be a quick phone call, email, video conference or in person meeting. You'll decide if you enjoy the advisor and trust their advice. This is also where you'll be able to ask questions, provide information about your operation, and go over the process to get insured.
2. Data Collection & Underwriting: this is where you'll get into the fine details about underwriting questions and information that will be necessary to engage the insurance market. You'll be able to chose from filling out PDF's, going through our smart-form technology, or provide it all over the phone, email, or in person.
3. Quote Proposal & Review: once your advisor has the information needed for underwriting, they will work with the insurance market to produce quotes. This can take a day or up to a week, depending on the time and operation.
4. Finalize Coverage: here you'll decide the coverage to move forward with. Final steps include signed documents, payment, and selecting a specific start date.

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ADIVSOR TIP: Be prepared to spend 5-10 minutes with your advisor to break the ice and get the ball rolling. Once aligned, your advisor will create clear next steps and create a timeline for quotes. If your business is new, and has unique risks, then you should expect a little back and forth.

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Get in touch with your advisor, or send over the details digitally today.

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