In Focus: How should UKGI underwrite emerging technologies like VR gaming and advanced robotics?

WE ASKED: How should UK general insurance (UKGI) approach underwriting new technologies such as virtual reality gaming and advanced robotics?

Adam Atkins, head of technology, Hiscox

Underwriting at its base level is a simple practice.

You take the time to understand a subject matter and with this understanding, you start to plot potential risk scenarios.

But, it is important not to overcomplicate this process and balance the depth of knowledge required with the need to keep pace with change.

In the instance of advanced robotics, very few underwriters are going to be able to achieve the level of understanding that scientists and engineers have in the subject matter – but this is ok.

There are enough specialist technology carriers in the UKGI market to deploy existing underwriting paradigms of thought to new technologies, to adequately service this industry with comprehensive risk transfer options.

Take factory production and supply line technologies, for example. These are not new concepts and these risks have been underwritten for decades.

So, while new technologies might feel groundbreaking or revolutionary in terms of what they deliver for the user, to an insurer that has specialised in technology for 30 years, the changes required in underwriting approach feel quite evolutionary.

The same can be said for virtual reality (VR) gaming. While the prominence of this technology has accelerated in recent times, underwriting approaches previously deployed for wearable health tech and age-old arcade machines are still relevant.

Simon Ritterband, managing director, Moonrock Insurance

The UKGI sector must ask itself if it wants to be an inhibitor or a supporter of UK PLC.

Part of being a supporter means backing new, unproven industries. The drone arena is a great example.

Initially, there was apprehension around insuring drones and insurance providers feared catastrophic events, such as the devices colliding with aeroplane engines over populated areas.

As an underwriter, we had to make it clear that there were opportunities in the drone sector and identify why the industry is safe.

The first insurer to recognise the potential growth opportunity of this market with us was Hiscox and it is now reaping the rewards of this first mover advantage.

The entrepreneurial approach of considering drones not just as a niche, but as part of a broader technological evolution helped shape the argument for drone insurance.

Insurers like Hiscox and Apollo – which took the early leap to underwrite this sector – have benefited not just financially, but also in terms of accumulating historical data to make informed decisions within this maturing, diversifying market.

Supporting innovation is crucial because exorbitant premiums could hinder the growth of startups and emerging sectors, ultimately limiting broader economic benefits.

Therefore, insurance companies must balance profitability with fair pricing to nurture emerging tech industries.

Ed Gaze, advisor, Value.Space

When underwriting emerging technologies like virtual reality gaming and advanced robotics, we should first assess how existing products can be adapted. There are clear opportunities here.

For instance, virtual reality gamers increasingly own valuable virtual assets in the metaverse – whether digital real estate, rare skins or non-fungible tokens.

These assets can be stolen or lost due to hacking, presenting a natural evolution for property insurance.

For robotics, errors and omissions (E&O) insurance offers a starting point.

If a robot damages high value equipment, is it due to a hardware defect, a software bug or human misuse?

Liability could fall on multiple parties – manufacturers, programmers or end users – making clear policy definitions and claims resolution critical.

Then there’s artificial intelligence (AI) driven decision-making, which is integral to robotics.

As AI models become more autonomous, determining liability gets even murkier. We’re already seeing litigation over AI failures and insurtech MGAs are racing to develop policies.

This could be the next evolution of cyber insurance.

Finally, for more unconventional VR risks – imagine you’re on the brink of winning a VR esports championship, only for your internet to crash, leaving your avatar frozen, humiliated and out of pocket.

Frivolous today? Perhaps. But if the metaverse scales as Mark Zuckerberg, co-founder and chief excutive at Facebook, predicts, then data driven reputational and business interruption insurance could be next in line.

Philip Wildman, founder, GG Insurance Services

Virtual reality gaming has become the poster child of the wider video games industry – but in terms of user acquisition, it still only represents a relatively small niche and enthusiasts market.

Although there are VR applications beyond gaming, for example in medical or educational applications, these often require further specialised underwriting.

If insurers are interested in working with any emerging risk, they should look to collaborate with specialist brokers, relevant experts in the field, as well as legal counsel, to assess and consider which potential risks are insurable and at what price.

Coverage options, such as general and product liability, cyber insurance and business interruption policies, would need to be tailored for the unique exposures VR represents.

When entering into any new and unknown territory, there will undoubtedly be claims that will take everyone by surprise, which is why a carefully considered, conservative and measured entry into this market will help protect an insurer’s portfolio. This would then need to be balanced against the potential size of the market opportunity.

Insurance companies should always be actively considering new markets and I hope that the insurance industry will continue to innovate and take risks.

Mark Armstrong, regional head of technology, middle markets, Sompo

Any approach to underwriting new technologies such as virtual reality gaming and advanced robotics should be made with caution because the risks are changing constantly and there are so many uncertainties.

But that should not necessarily mean we avoid them as an industry – we just need to understand them better.

With disruptive technologies and emerging trends now at the forefront of the tech industry and creating significant sector growth potential, it is time for underwriters to follow a similar path and take an innovative and evolving approach to risk.

AI and large language models have the potential to transform our everyday lives beyond recognition. Government approaches to regulation will mould the scope and reach of these emerging technologies. Perhaps the real question here is can we ever get to a place where a there is a universal global standard that works for all?

The cyber threat landscape is constantly evolving and AI advances will only increase the pace of change in multiple ways. For example, can the opportunity created through AI to manage cyber risk really control and counter the threat of AI being used as a cyber weapon in equal measure – or does it, in fact, provide an even greater risk?

To tackle these issues effectively, insurers need teams with leading expertise that really understands the nature of the risks – particularly around AI, its impact on the Internet of Things and robotics autonomy.

Ultimately, this will help carriers better support their clients by navigating more easily the significant underwriting complexities that come with disruption, leading to more comprehensive risk transfer options and a forward-looking insurance sector.