Insurance needs to keep pace with esports’ growing spotlight
As traditional sports games and video gaming converge, our definition of sports is changing — and at a rapid pace. Esports and other non-traditional sporting events have been on a rapid pace to take a noteworthy share of consumers’ attention and wallets. In Paris, the AccorHotels Arena sold out in November 2019 as fans packed in to watch groups of teenagers competing in the 2019 League of Legends World Championship final on large-scale video screens. More recently, amid the current global pandemic, the borderless nature of gaming has meant that esports are thrust further into the spotlight as fans are turning to simulated games and contests on their personal devices.
Around the world, physical sports stars are watching themselves featured in an esports game from the comfort of their sofa. Organizations are changing the way we watch and participate in sports such as soccer and boxing, even Formula 1 has now streamed its first ever Virtual Grand Prix, and continues to do so in place of every postponed Grand Prix in 2020. Television outlets are also getting in on the action. In the U.S., more than 900,000 viewers tuned in for the inaugural eNASCAR iRacing Pro Invitational Series on Fox Sports, more than one third of the audience of a major traditional NASCAR race. In such a rapidly evolving market with accelerating growth, accident insurance remains as relevant as ever to event organizers, hosts, players and sponsors as it has always been in traditional sport, but the perils and exposures are different — and our market needs to adapt and price accordingly.
Esports competitions are big business, with prize pools topping $10 million at a single tournament. As video games soar in popularity, gamers themselves are becoming stars. Much like traditional sporting athletes, video gamers are now being supported and sponsored by large corporations such as Sony, EA, Nike, Intel and Coca-Cola.
With increased levels of fame and pressure, video gamers must ensure their physical health and well-being remain a priority. If a gamer sustains an injury in their day-to-day lives, whether in the form of broken bones in their hands or body, or an eye injury that may affect their vision, it could affect their ability to earn prize money from esports as well as earn or retain lucrative sponsorship deals. Whatever the injury may be, the need for personal accident and disability insurance is on the rise.
In the esports market, insurers need to re-evaluate their underwriting approaches. They need to adapt underwriting appetite, risk analysis and policy wordings to ensure they remain relevant to an emerging market. Insurers need to take this change seriously as gaming becomes a global phenomenon and revenue within esports continues to increase. As esports rise in popularity and realism, celebrity gamers will challenge physical sports stars for fans’ adulation and screen time.
One example of a new global sport – drone racing – illustrates the phenomenon and its challenges. In 2016, 15-year-old Luke Bannister from the United Kingdom outperformed 150 global teams at the Dubai World Drone Prix, the first truly global drone-racing event. Bannister became the first World Drone Prix champion, winning $250,000 in the process.
After taking the drone racing world by storm, Bannister was picked up by Spin Master Corp., a leading global children's entertainment company, and added to the Air Hogs roster of world-class drone pilots. Despite the relative infancy of the drone racing industry, top-ranked drone pilots such as Bannister are already earning six-figure incomes from sponsorship alongside impressive competition prizes, according to DR1 Racing founder Brad Foxhoven, and the compensation will only rise as esports gain in popularity around the world. Insurers can provide esports players with a contingent income stream should an accident or health-related incident curtail their earnings. Policies may also extend to other team players, coaches and trainers. On occasion, venues hosting esports events also take out personal accident coverage for players.
Some esports players are attempting to form associations or even unionize to adopt joint standards, share advice and experiences with fellow video gamers and seek external advice where necessary. This presents a great opportunity for insurance companies to provide coverage to large numbers of potential customers through affinity schemes.
Esports are testing the boundaries of what some consider sport as they integrate technology, physical experiences and virtual reality. Large consumer brands have realized the profit potential in this phenomenon and are piling in sponsorship and advertising money, with projected investment set to increase dramatically in the coming years. As an emerging risk, esports places new challenges on the insurance industry to protect an emerging class of athletes with unique protection needs. We need to stay on the pulse of physical and virtual sports and the games of the future if we are to remain relevant in the ever-changing, competitive world of sports.
James Hamilton is global head of accident and health insurance at AXIS Insurance, Chicago.