Insurance gets a bad rap. Nobody likes spending money on something they hope to never need. Add to that some uncertainty as to whether a claim you make will even be paid, and I can understand people's reticence. Insurance can indeed be complicated, but I hope this article can shed some light, and leave you with some confidence when it next comes time to part with your hard-earned cash.
My name is Phil Wildman, and I set up GG Insurance Services in 2019 as a broking division of our larger general insurance company to combine my passion for video games with my career in insurance. Our team works with the global games industry to help answer questions and solve their insurance needs. This article is a quick primer on insurance; to try and demystify it and hopefully arm you with some useful knowledge to keep your premiums down and make sure you are buying the right stuff.
As the games industry is unlike any other, many insurers are unwilling to cover it due to a general lack of understanding. This leaves the industry few options on where to go. We have seen many businesses frustrated with inappropriate or totally inadequate cover.
Do I even need insurance?
"Insurance gets a bad rap. Nobody likes spending money on something they hope to never need"
The short answer is: probably. There are lots of different types of insurance, so it's more a question of which insurances do I need rather than whether you need it at all. You may find that it is a contractual requirement to carry insurance, in which case your hand is forced. Also, depending on where you are, there may be a legal requirement to maintain certain types of insurance -- for example, in the UK, if you have any employees you must maintain £5 million of Employers Liability insurance.
Which insurances should I get?
Below is a primer on what I feel are some of the key insurances to consider for your business:
- Professional Indemnity (aka Errors and Omissions)
This is very often included in contracts, especially between publishers and developers. This insurance is designed to cover mistakes made by your company, which have an impact on the other party in the contract. If you were developing for a large project with a publisher, for example, which subsequently caused a project to be delayed or cancelled, the publisher could sue you for damages.
Hopefully any such issue could be resolved amicably. However, with Professional Indemnity insurance in place, it would be able to pay for legal costs and any potential settlement. Many publishers require developers to maintain good levels of PI insurance so they can have comfort that if something did go badly wrong, there is potentially some money there to resolve it. Hence it being written into many contracts.
This is generally the most expensive type of insurance, because it is a high risk to insurers and claims are unfortunately quite common. When deciding how much to buy, think about what is the most you could possibly be sued for (don't forget to allow for legal costs on top). If you have a contractual requirement to get a certain amount ($5 million for example) you sometimes may be able to negotiate this down and save yourself a significant amount on your premium if it is a smaller project. Bear in mind that most policies are sold on an annual basis, so if you have multiple projects ongoing, ensure you have enough cover overall.
Cyber insurance is there to pick up issues from hacking, ransomware, viruses and so on. This cover is especially important if you are handling payments or user data and can cover first-party losses (direct losses to your business), plus third-party liabilities (you are subsequently sued after an issue). The best ones to look out for are those which provide additional services as part of the package and have a robust incident response team.
The cost of this can vary wildly, depending on the levels of cover you choose, how sensitive your data is, and how exposed it is to external parties. You can sometimes save money if this is packaged into a wider policy, but check the cover is still adequate.
- Public and Products Liability
These insurances cover your business from getting sued by the general public and consumers. It is widely available and generally cheap. Most games companies have little direct exposure to consumers, so the risks are small for insurers.
"If someone playing your new VR game runs into a wall, they could blame your game for causing damage or injury"
However, if you are making physical products, peripherals, or collectibles, you need to consider the risk of someone injuring themselves somehow. Generally, video games are safe products, but you may need to consider that if someone playing your new VR game runs into a wall, they could blame your game for causing damage or injury. Unlikely as this may sound, it does happen, and even if there is no end settlement you could still incur legal costs dealing with it.
- Employers Liability and Workers Compensation
This covers your business from getting sued by your own employees and is a legal requirement in many places. It is designed to pay for legal costs and subsequent settlement of a claim from an employee due to injuries sustained at work. As the games industry is a fairly safe environment to work -- compared to construction for example -- this cover is usually fairly cheap and widely available.
When purchasing this cover, look out for permitted activities and be mindful that if your staff are doing things outside of this the insurance may not respond. You want this to be as broad as possible.
- Directors and Officers
This covers you as an individual. While you may assume that lawsuits would only be directed at the relevant business, in this industry it is common for individuals to be wearing many different company hats and may find themselves in receipt of a letter addressed to them personally.
Broadly speaking, personal claims or proceedings against directors or officers can arise from any decision made or act carried out in the workplace, however innocuous it may have seemed at the time. Claims range from frivolous and occasionally malicious claims made by disgruntled customers who weren't happy about the service they received, all the way through to official investigations.
Unfortunately, there is nothing to stop someone going after you as an individual, and whether you were at fault or not you would be personally liable for the costs of dealing with it. Your professional Indemnity insurance for example, only covers the business and would not cover you as an individual.
"Personal claims against directors or officers can arise from any decision made or act carried out in the workplace, however innocuous it may have seemed at the time"
There are a myriad of other insurances to consider depending on your business needs. For example:
- Intellectual Property
- Trade Credit
- Business Interruption
- Events Contingency and Liability
- Travel Insurance
- Legal Expenses
- Contents and Equipment
- Medical Insurance
- Personal Accident
- Broadcast and Media Liability
Where to get insurance?
There are two ways to get insurance, and it is important to know the differences between them -- you can buy direct from an insurer or use a broker.
There are various insurers out there that offer business package insurance, and you can often find many of the aforementioned coverages at a reasonable price. However, you need to be confident that you are covered for your activities within the industry and the insurer understands the liabilities they are insuring. Despite the scale of the games industry, it is still seen by many insurers as niche, and their off-the-shelf products can be a square peg for a round hole.
If you go via a broker, they will be able to negotiate with various different insurers for you, and can usually apply some gentle leverage to get the prices below “book price.” They should present you with a few different options and explain the pros and cons of each. Depending on the broker you choose, they should be specialised in your industry and understand your needs and thus able to give best advice on what products are (and aren't) relevant to you and recommend the best insurers and coverages for you.
Brokers will either earn commission from the insurers, or charge fees for arranging your insurances. They usually have special deals with insurers or access to exclusive products and should be able to get you an overall cheaper package.
Make sure you update your insurer or broker as your business changes, to make sure your insurance is kept up to date. If you take on a new contract which changes the face of your business, the small policy you were buying previously may no longer be enough. Conversely, if you downscale you may be able to save some money by adjusting your coverage levels.
Check the wording. Nobody likes reading insurance policy wordings, but it helps to double check you are covered for what you think you are -- if you have a broker they should be able to summarise this for you. Don't be afraid to try and renegotiate the insurance requirements in a contract. You could save a huge amount by reducing the required limits if you think they are overkill. Often the insurance clauses in contracts are standardised and do not consider the size and risk of the project being worked on.
Philip Wildman is managing director of GG Insurance, which prides itself on passion for and understanding of this industry. GG takes a proactive approach to learning and understanding as the industry constantly changes, on the belief that it is crucial to not only understand insurance inside out, but the games industry itself. For more information: firstname.lastname@example.org.