The Legal Challenges Surrounding Transactions in the Metaverse: The Case of Insurance

Open Access
2025
OriginalPaper
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Erschienen in:

Verfasst von: T. Koezuka
Erschienen in: Emerging Legal Frontiers in Insurance
Verlag: Springer Nature Switzerland

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Abstract

The Metaverse-World is often regarded as an extension of the Real-World, with avatars seen as extensions of their users’ physical bodies. However, the legal nature of the Metaverse-World depends on how it is defined in the terms of use established by Metaverse Operators. Emphasizing the legal effect of these terms supports viewing the Metaverse-World as independent from the Real-World, with avatars positioned as autonomous actors within it. Granting legal personality to such avatars becomes a conceivable option. From this perspective, transactions involving the Metaverse-World can be categorized into four types, based on where the transaction occurs and where the object of the transaction exists. Each type entails specific risks, and liability for resulting harm generally rests with the Metaverse Operator. Where such liability is excluded, insurance contracts tailored to each transaction type should be developed to address the associated risks.

1 1Introduction

In the Metaverse-World, ¹ various entities that appear visually existent, such as avatars, parks, trees, skies, and buildings, differ from tangible objects in the Real-World as they lack a material substance. Nevertheless, when a user wears a VR Headset ² (or VR Goggles, Head Mount Display), enters the Metaverse-World, and rides a roller coaster in a virtual amusement park, their heartbeat will accelerate, experiencing sensations akin to those in a Real-World roller coaster ride. As the Metaverse-World becomes socially implemented and widely utilized across different countries, discussions on the necessity of legal regulations governing the Metaverse-World will inevitably arise.

At present, there are neither Metaverse courts with jurisdiction over disputes unique to the Metaverse-World nor Metaverse Parliament or Executive Branch. Furthermore, many countries have yet to establish sufficient legal regulations concerning legal acts or torts occurring within the Metaverse-World. Issues arise regarding consumer protection for users, especially the safeguarding of minors who may become overly engrossed in gaming. Additionally, the anonymity of avatars complicates the relief of victims suffering mental harm due to harassment. ³ Moving forward, new risks will likely emerge in the Metaverse-World, raising questions about the type of insurance required and whether it should align with the Real-World insurance frameworks.

This chapter ⁴ focuses on Transactions in the Metaverse-World. First, I will discuss the legal epistemology of the metaverse. Second, I will confirm the definition of the metaverse and what it is. Third, it explores the legal relationship of whether the Metaverse-World should be regarded as an extension of the Real-World or as an independent, separate entity. Fourth, I will examine the legal issues surrounding transactions in the metaverse. Finally, it presents a concluding discussion.

2 2The Metaverse-World and Legal Epistemology

2.1 2.1Legal Epistemology

Human beings understand and perceive the world from the perspective of meaning. We cannot recognize an existence to which we cannot assign meaning, even if it is right in front of us. That is, if we cannot find meaning in something, we are unable to perceive its existence.

Based on accumulated experiences, our brains assign meaning to what is in front of us and recognize it as an image. This epistemology of experience is said to originate from John Locke’s “An Essay Concerning Human Understanding.” However, when confronted with advanced scientific technology that we have never experienced before, we are unable to comprehend its nature due to our lack of prior experience. In other words, we cannot recognize something unless we integrate it into our own world.

Consequently, in every society of every nation, unknown entities are always given names and integrated into that society. Even unidentified flying objects have been incorporated into society by being named “UFOs.” If this process is not possible, unknown entities are relegated to the realm outside society as mere unknown objects, ghosts, illusions, or conspiracy theories. Recently, they have been treated as non-existent and as having no impact on the current social order. Conversely, this implies that human beings and our societies are vulnerable and susceptible to the unknown.

In the Metaverse-World, various visually perceived entities, such as avatars, parks, trees, skies, and buildings, lack material substance but can be visually recognized in the same way as tangible objects in the Real-World. From the perspective of visual recognition, the Metaverse-World allows recognition of buildings, land, cars, drones, forests, people, and other elements just as they are perceived in the Real-World. If this is the case, the Metaverse-World, where people gather and purchase land and items, could be seen as a legal domain like the Real-World.

Conversely, if the Metaverse-World were merely a part of a private space within a house and did not constitute a space comparable to the Real-World, then there would be no need to discuss it from a legal perspective.

2.2 2.2The Metaverse-World and Movies

The people, cars, and buildings depicted on a movie screen may appear real to the eye, but they do not exist in the Real-World. However, when watching a movie, one may experience emotions such as being moved, crying, laughing, or feeling tense, creating an illusion as if the events unfolding on screen are occurring in the Real-World. The information gained from watching a movie is transmitted to the brain through visual and auditory senses, and is understood in the same way as images unfolding in the Real-World. However, the images in a movie are not of the Real-World.

In the metaverse, avatars, cars, and buildings visible through sight are sent to the brain through visual stimuli in the same way as images in a movie and are understood as images unfolding in the Real-World. However, movie images are reproductions of real people, cars, and buildings filmed in the Real-World, and therefore, for example, people do not move freely. In contrast, in the metaverse, people and cars can move freely, and the images unfold as if in the Real-World. People, cars, and buildings are data entities, and they do not take the same form as those in the Real-World. They only appear to have shape.

On the other hand, in the Real-World, objects like the human body or cars, which are perceived to have shape, are actually full of holes at the level of subatomic particles, and the appearance of shape is a result of the brain’s functioning. In both the metaverse and the Real-World, the recognition of the existence of shape through sight is ultimately a function of the brain, and the human body or cars in the Real-World may, in a sense, be similar to the entities seen in the metaverse.

2.3 2.3Ethical, Legal, and Social Issues

Even in the Real-World, rights, obligations, and rules are not visible to the naked eye, nor can they be physically grasped and confirmed. Instead, in common law jurisdictions, they are recognized through case law, while in civil law jurisdictions, they are acknowledged through statutes. In other words, we empirically perceive and understand the factual premises upon which these rights, obligations, and rules are established, even though they are not visually recognizable.

However, advances in modern cutting-edge science and technology often produce effects that appear as “magic” or “illusions” to the general public in their daily lives, astonishing them. Simply put, when ordinary people witness the wonders of advanced technology, they are unable to predict, based on their prior experience, how the introduction of such technology into society will alter their stable lives. This uncertainty frequently leads to vague anxiety or fear among the public, triggering ethical, legal, and social concerns, as well as resistance or rejection. Therefore, for advanced technological innovations to be successfully integrated into society, it has been pointed out that it is necessary to address the Ethical, Legal, and Social issues (ELSI) ⁵ that the public perceives.

3 3What Is the Metaverse?: The Definition of Metaverse

The term “Meta” in Metaverse generally signifies something that transcends or is of a higher level (such as a step in a ladder), while “verse” is said to represent a part of “Universe,” meaning a domain or realm. Therefore, “Metaverse” ⁶ is a coined word combining “Meta” and “Universe.” The Metaverse-World is a world constructed in a form that is either similar to or transcends the Real-World. ⁷ ^, ⁸ On the other hand, an avatar, like a costume, serves as a symbol through which the “person inside” ⁹ expresses themselves. However, there are avatars that do not have an actual “person inside.” In the Metaverse-World, avatars provide a space where various experiences can be had and communication with other avatars can occur, surpassing physical constraints.

The essence of the Metaverse lies in being a space in a different dimension, liberated from the physical constraints of the Real-World. To experience this essence, it is necessary for the Metaverse user to wear VR goggles and immerse themselves in the Metaverse-World. The Metaverse-World experienced on a smartphone or PC without wearing VR goggles cannot provide the essence of the Metaverse, as when the user changes their viewpoint, the Real-World environment comes into view, interrupting the experience. Therefore, in this chapter, the term “The Metaverse-World” refers to the virtual space or virtual world ¹⁰ in which the user feels immersed by wearing VR goggles. This chapter excludes virtual spaces or virtual world used on PCs or smartphones without wearing VR goggles.

4 4The Legal Relationship Between the Metaverse-World and the Real-World

4.1 4.1Extension Theory vs. Independence Theory

When considering legal issues in the metaverse, understanding the legal relationship between the metaverse and the Real-World is of paramount importance. ¹¹ I have always believed that this question serves as the starting point for analyzing legal issues in the metaverse. ¹² As previously mentioned, human beings experience anxiety and fear not only toward advanced scientific technologies but also toward new entities they possess or encounter for the first time. Based on their existing worldview, shaped by prior experiences and understanding, they attempt to position and accept these new entities. Until they successfully integrate new entities into their worldview, they often exhibit hesitation and confusion. Similarly, even when experiencing the metaverse, human beings attempt to understand and accept it by positioning it within the context of their existing world and worldview.

Consequently, people generally perceive the metaverse as an extension of the Real-World or as possessing attributes of the Real-World. This is likely how the public understands it, and viewing the metaverse as an extension of the Real-World provides a practical foundation for comprehension. This perspective, which considers the metaverse as an extension of the Real-World, is referred to as the “extension theory.” According to this theory, the Real-World legal regulations naturally extend to the metaverse. However, careful consideration is required to determine whether Real-World legal regulations, which govern a world composed of physical and tangible objects, can be directly applied to the metaverse, which exists purely as digital data.

In contrast to this perspective, an alternative view sees the metaverse as a separate dimension freed from the physical constraints of the Real-World. Under this view, the metaverse is understood as an independent space distinct from the Real-World. In reality, the metaverse is composed of data and does not operate under the same principles of causality as the Real-World. In the Real-World, visible “people” and “objects” inevitably decay and disappear. However, in the metaverse, data does not degrade, allowing entities to exist perpetually. Consequently, avatars, unlike humans, do not have physical bodies, meaning they do not experience death or physical deterioration. Strictly speaking, understanding the metaverse as a separate, independent space aligns more closely with its nature. This perspective, which treats the metaverse as an independent domain, is referred to as the “independence theory.” According to this theory, legal regulations in the metaverse should not automatically follow the Real-World laws but should instead be developed separately based on the unique characteristics of the metaverse.

The legal interpretation of the relationship between the metaverse and the Real-World is reflected in the legal relationship between avatars and their human operators. According to the extension theory, an avatar is considered an extension of its human operator. In other words, the avatar is perceived as an extension of the physical body of the natural person controlling it. This theory, however, encounters significant challenges in explaining AI-driven avatars that operate without a human operator (hereinafter referred to as “AI avatars” ¹³ ^, ¹⁴).

Conversely, under the independence theory, AI avatars are understood as independent entities separate from human operators. ¹⁵ For example, when people travel abroad, they find themselves in a completely different environment from before their journey. As they build new relationships and accumulate experiences in this foreign setting, their identity evolves. Similarly, when individuals enter the metaverse, they become a different version of themselves, much like how a traveler’s identity shifts in a foreign country. Under the independence theory, the existence of AI avatars in the metaverse, despite their absence in the Real-World, becomes easier to explain.

4.2 4.2Legal Creation Function by Law in the Metaverse-World

In the metaverse, the space is not filled with tangible objects, so designers of the metaverse can freely create using data and imagination without being bound by the physical constraints of the Real-World. For example, humans can become elderly, young boys or girls, change from male to female, transform into animals like dogs or cats, or even become inorganic objects such as a soda can or a pebble. Designers can create worlds inspired by films like “Jurassic Park” or even the surface of Mars. In universities, it is possible to construct metaverse classrooms where avatars of various forms – fried eggs, hot dogs, pandas, cats, tigers, cans, bottles, and human-shaped figures – can be created and used for teaching. ¹⁶

In the Real-World, except during times of war, murder is considered illegal under criminal law, but in the metaverse, games in which individuals kill each other are permitted. For example, in the game “Fortnite”, murder is commonplace. Since the avatars in the game are not human, it is generally believed that Real-World murder charges do not apply. Although this may seem obvious, at least in the case of “Fortnite”, the metaverse is not considered an extension or expansion of the Real-World.

Moreover, in the metaverse, even sexual abuse of avatars representing minors is not subject to the Real-World legal regulations if the participants consent, because the avatar’s appearance does not necessarily reflect the age of the person controlling it.

Under this understanding, in the metaverse, clusters of avatars with shared hobbies, ideologies, or interests might engage in activities that would be considered illegal in the Real-World, with an implicit agreement that such actions are permissible. If a consensus is formed or rules are established, actions that are illegal in the Real-World could become illegal in the metaverse as well. This phenomenon is referred to as the legal creation function based on customs in the metaverse. This function is derived when the legal relationship between the metaverse and the Real-World is understood according to the theory of independence. Under the theory of extension, the Metaverse-World would be defined by the Real-World, making it difficult to freely create it as an independent space.

The key issue is determining the legal basis for the metaverse’s legal creation function. ¹⁷

One approach is to derive it from the user agreement between the metaverse provider and the users. The terms and conditions of the user agreement are defined by the terms of service. ¹⁸ Therefore, by defining the Metaverse-World that the provider offers to the users in terms of service, i.e., by defining the Metaverse-World – the effects of the user agreement will extend to the Metaverse-World, and it will be defined as such a space.

In other words, the legal creation function of the Metaverse-World is based on the user agreement derived from the terms of service.

Another approach is when, as mentioned above, the terms of service do not define the metaverse space. In this case, the avatars gather to define a specific area or the entire space of the metaverse. The condition for avatars to make such a decision is that the terms of service do not specify that avatars lack the authority to decide what kind of space they will create within a specific area or the entire metaverse.

5 5Transactions in the Metaverse-World

5.1 5.1Transaction in the Metaverse-World and the Real-World

In developed countries where capitalism is highly advanced, leading a self-sufficient lifestyle – such as cultivating crops in fields, fishing in the sea or rivers, weaving clothes, and constructing homes – is extremely difficult.

Most people live as consumers, purchasing goods from retail stores as part of their daily lives in the Real-World. This consumer lifestyle remains fundamentally unchanged in the Metaverse-World. However, since avatars in the Metaverse do not require food, clothing, or shelter, they do not engage in daily consumption activities such as purchasing mineral water or bread at a supermarket, ordering coffee at a café, or eating spaghetti at a restaurant, as consumers do in the Real-World.

Sometimes avatars in the Metaverse may still purchase and wear branded shoes made as NFTs, enjoying fashion and distinguishing themselves from others. Furthermore, when live performances featuring popular figures singing and dancing are held in the Metaverse, many fans participate as avatars.

The subject matter of a transaction can be categorized into two types: (1) those that exist in the Metaverse-World and (2) those that exist in the Real-World. Similarly, the parties involved in a transaction can be categorized into (1) those that exist in the Metaverse-World and (2) those that exist in the Real-World. As a result, transactions can be classified into a total of four types. ¹⁹

Type 1 transactions refer to cases where a “person” in the Real-World enters into a sales contract for a “product” that also exists in the Real-World. Type 2 involves a “Real-World” person selling a “product” in the Metaverse-World. A typical example is when a promoter who plans and operates the Real-World concerts plans a live performance in the Metaverse-World and sells tickets for it in the Metaverse-World.

Type 3 is when an avatar in the Metaverse-World sells a product in the Metaverse-World. A typical example is when a salesclerk avatar at a department store that has a branch in the Metaverse-World sells NFT-made brand shoes for avatars in the Metaverse-World. Type 4 is when an avatar in the Metaverse-World sells a Real-World product. In Type 4, we can envision a case where a person inside the avatar in the Metaverse-World sells their own the Real-World items, such as a bicycle or a PC. In this Type 4, if the person inside the metaverse avatar does not have ownership of the Real-World product, the legal structure will differ depending on whether the focus is placed on the avatar or the person inside.

Thus, it is Types 2 and 4 where a conflicting relationship arises between the Metaverse-World and the Real-World. In this case, the question becomes which world should be the basis for legal structuring.

5.2 5.2Contradictory Relationship Between the Metaverse-World and the Real-World, and Transaction Protection

5.2.1 5.2.1Issues Arising from Types 2 and 3

In the case of type 2, ²⁰ when the Metaverse-World concert tickets are sold in the Real-World, the Metaverse-World ticket sales rules may conflict with the Real-World ticket sales rules. In particular, the pricing of tickets for the Metaverse-World concerts, where many participants can be recruited by increasing the server capacity, may differ from the pricing of tickets in the Real-World, where there are physical limitations in the first place. There may also be differences in cancellation policies when the promoter cancels the concert, and differences in rules regarding resale. In this case, the question arises as to which rules, the Real-World or the Metaverse-World, take precedence. In the case of type 3, perhaps the most problematic case is when a minor in the Real-World, disguised as an adult avatar, purchases a high-priced item. The question arises whether the minor should be protected by the Real-World rules, or whether the seller should be protected based on the adult avatar’s appearance in the Metaverse-World. Thus, in types 2 and 3, the issue is how to view the legal relationship between the Metaverse-World and the Real-World.

5.2.2 5.2.2Issues Arising from Type 4

In Type 4 scenarios, both contracting parties and the subject of transaction exist entirely within the Metaverse-World. ²¹ This refers to cases where, in the Metaverse-World, Avatar A (with ‘person inside’ a) purchases NFT-based shoes from Avatar B (with ‘person inside’ b).

According to the extension theory regarding the legal relationship between the Metaverse-World and the Real-World, even in Type 4 cases, while the purchaser is the adult avatar A, the ‘person inside’ a may be a minor. How this contradiction should be resolved is one issue. Specifically, in the case of the extension theory, the question arises as to whether the Real-World or the Metaverse-World should take precedence when a conflict arises between them. Since the extension theory considers the Metaverse-World as an extension of the Real-World, it should be interpreted that the Real-World takes precedence. ²²

Under the independence theory, when the purchaser is the adult avatar A while the ‘person inside’ a is a minor, the basic principle is to process the matter based on the adult avatar A.

However, in reality, it is not possible to explain everything solely from the perspective of either the extension theory or the independence theory. This is because various types of Metaverse spaces can exist in practice. Specifically, as mentioned earlier, Metaverse Operators conclude user agreements with users and provide safe and secure Metaverse Services. Therefore, by strictly verifying user identity at the time of contract conclusion and taking measures such as excluding use by minors alone or obtaining parental consent, legal risks are prevented in advance. This is precisely the responsibility of Metaverse Operators as Metaverse Platformers.

In contrast, according to the independent theory, the nature of the Metaverse-World is determined by the content of the Metaverse Operator’s “Space Definition.” If the Metaverse insurance contract provides a meaningful “space definition,” there are essentially two possibilities: ① when items in the Metaverse-World are the subject of the insurance, and ② when the avatar is the insured party.

In the case of ①, at the very least, among the parties involved in the insurance contract, the avatar who holds the digital ownership of items other than the avatar itself within the Metaverse-World is the one to whom the risk is attributed. Therefore, the avatar becomes the insured party. The conclusion of such an insurance contract is made by other parties within the Metaverse-World. ²³

In the case of ②, depending on the content of the “space definition,” when an AI avatar is granted legal personality and defined events such as death, injury, or illness occur, the cost to “repair” the avatar would be considered a loss, leading to the need for a type of accident and health insurance contract in which the AI avatar is the insured party.

5.3 5.3Risk Management and Liability for Risks

5.3.1 5.3.1Liability of Metaverse Platform Operators

Considering this, it can be seen that in the independence theory, how the Metaverse-World is defined as a “space” in the terms of use has a very important meaning. It can also be seen that it has a very important meaning in that the terms of use will resolve any contradictions or conflicts between the Metaverse-World and the Real-World. This means that the Metaverse Operator also plays the role of a risk manager who reduces the risk of disputes in the Metaverse-World in advance.

If such a Metaverse Operator is a risk manager, it also means that the Metaverse Operator is in a position to be responsible as a Metaverse Platformer. ²⁴ ^, ²⁵ In other words, of the total number of users of the Metaverse-World, many are individual users and consumers who use the Metaverse Services provided by the Metaverse Operator. Metaverse Operators can exercise law-creating functions by defining the “space definition” of what kind of space the Metaverse-World is in the terms of use. In other words, whether to make it a space for gaming that involves killing many enemies, a space for enjoying communication, or a space for enjoying dancing depends on the “space definition” of the Metaverse Operator. Depending on what kind of “space definition” is made, there are naturally points where rules are set. In other words, Metaverse Operators can also establish behavioral norms according to the “space definition.” Conversely, if a Metaverse Operator establishes rules that contradict the “space definition,” and legal disputes arise between avatars as a result, the Metaverse Operator will be responsible for compensating for the “damages” ²⁶ suffered by the injured avatar. ²⁷

5.3.2 5.3.2Insurance Contract and Metaverse Platformers

According to the independence theory regarding the legal relationship between the Metaverse-World and the Real-World, Metaverse Operators are granted the authority to freely “define the space” of the Metaverse-World under the “freedom of business” recognized by liberal states. However, while Metaverse Operators conclude usage contracts with consumers who use the Metaverse-World, since the content of the usage contract pertaining to each the Metaverse-World is to provide safe and secure Metaverse Services to consumers, Metaverse Operators have the authority to “define the space,” but also have the obligation to provide safe and secure Metaverse Services to users. This is also a responsibility as a Metaverse Platformer. For example, if a Metaverse Operator defines a space that deals with spiritual phenomena that are not supposed to exist in this world, they will have an obligation to give prior notice to consumers using this space that it deals with spiritual phenomena. If a consumer suffers mental “damage” in a case where the Metaverse Operator has not fulfilled their obligation to ensure that safe and secure Metaverse Services are available, the Metaverse Operator will be liable for damages. In this case, even under the independence theory, since it is the “real person” who suffers the mental “damage,” the terms of use must be established consistently so that the pursuit of the Metaverse Operator’s responsibility can be properly carried out. Regarding the content of the terms of use, it is highly likely that approval by the supervisory authorities of each country will be required.

Metaverse Operators bear responsibility as Metaverse Platformers in this way, but the question becomes how to legally deal with this liability risk. Since Metaverse Operators will be liable for damages, if Metaverse Operator liability insurance is developed with non-life insurance companies in the Real-World, they will conclude this liability insurance contract. The contractual parties of this liability insurance in this case are those who exist in the Real-World. That is, the policyholder is the Metaverse Operator, the insurer is the non-life insurance company, and the insured is the Metaverse Operator. The victim is also the “real person” in the Real-World.

In other words, liability insurance that covers damages resulting from a Metaverse Operator’s failure to fulfill its obligation to ensure safe and secure use for users – leading to legal liability for damages – ultimately has the same fundamental contract structure as liability insurance in the Real-World.

Next, even if a Metaverse Operator does not bear legal liability for damages related to the “space” it has defined, other risks may still arise within the Metaverse-World. The following sections will sequentially examine the main risks in Type 2, Type 3, and Type 4 scenarios and explore the corresponding metaverse insurance solutions.

5.4 5.4Risks That May Arise in Type 2 or Type 3 and Corresponding Metaverse Insurance

5.4.1 5.4.1The Cases of Type 2

Since an insurance contract is also a form of insurance transaction, it is included as one of the transactions in Type 2. Insurance transactions classified as Type 2 involve cases where the insurer, policyholder, insured, or beneficiary (hereinafter referred to as “insurance benefit recipient”) exists either wholly or partially in the Real-World, while the insurance object (in the case of property insurance) or the insured (in the case of life insurance, accident insurance, or health insurance) exists in the Metaverse-World.

When the insurance object or insured exists in the Metaverse-World, if the risks arising therein are attributed to an avatar within the Metaverse-World through the insured or the insurance object, the insurance contract addressing these risks is referred to as a “Metaverse insurance contract.”

In Type 2 insurance transactions, according to the extension theory, which considers the Metaverse-World as an extension of the Real-World, if the insurance object or insured exists in the Metaverse-World, the risk ultimately belongs to a specific individual in the Real-World. Therefore, under this theory, a “Metaverse insurance contract” does not exist.

On the other hand, under the independence theory, in the case of property insurance contracts, if the digital owner of the insurance object in the Metaverse-World is an avatar existing in the Metaverse-World, the risk is attributed to that avatar. In the case of life insurance contracts, when a “death” event occurs within the “space definition” of the Metaverse set by the Metaverse Operator, the risk is attributed to the avatar insurance benefit recipient. Thus, under the independence theory, insurance transactions in Type 2 can be regarded as Metaverse insurance contracts.

However, it is important to note that within the “space definition” set by the Metaverse Operator, it must be determined whether avatars are granted legal personhood, whether they are recognized as “persons,” and what constitutes “death” for avatars.

Meanwhile, there are cases where an insurance contract may be designed to provide insurance benefits within the Metaverse-World. Such insurance contracts, strictly speaking, should be considered insurance contracts in the Real-World, as the risk ultimately belongs to a specific person in the Real-World, and therefore do not qualify as “Metaverse insurance contracts.” However, these insurance contracts are new types of contracts that did not exist in traditional insurance frameworks and are close to Type 2 insurance contracts.

A typical example of such a new insurance contract, which may become a reality and gain business traction in the future, is the “Resurrection of the Deceased” insurance contract. In this type of insurance, the insured is a “person” in the Real-World, and upon the insured’s death, the insurer in the Real-World provides an insurance benefit in the Metaverse by creating an avatar that closely resembles the deceased, effectively bringing them back to life. ²⁸

Such insurance can be structured either as a life insurance contract or a property insurance contract. ²⁹ If structured as a life insurance contract, whereas traditional life insurance pays a fixed amount to the beneficiary upon the insured’s death, in this case, the insurance benefit recipient (who is often a legal heir) would receive the “resurrection of the deceased” as an in-kind benefit. Depending on the specifics of the life insurance contract, which reflects the cost-benefit relationship of the insurance premium, the deceased’s 3D avatar could be created using photos, videos, or voice recordings, bringing them back to life in the Metaverse-World. Furthermore, AI technology could recreate the deceased’s personality, enabling interactive conversations.

If structured as a property insurance contract, the death of the insured typically causes emotional distress to their legal heirs. To compensate for this mental anguish, a 3D avatar of the deceased would be created to bring them back to life in the Metaverse-World.

Regardless of whether it is a life insurance contract or a property insurance contract, when such a scenario becomes a reality, legal issues related to the deceased’s personality rights may arise. For example, if the deceased had an irritable personality in life but their avatar is created with a kinder personality to match the preferences of the surviving relatives, it could lead to a violation of the deceased’s personality rights. ³⁰

5.4.2 5.4.2The Cases of Type 3

Since an insurance contract is also a form of insurance transaction, it falls within the scope of transactions classified as Type 3. Insurance transactions belonging to Type 3 involve cases where the insurer, policyholder, insured, or beneficiary (hereinafter referred to as the “insurance benefit recipient”) exists entirely or partially within the Metaverse-World, while, on the other hand, the insured object (in the case of property insurance), the insured person (in the case of life insurance, accident insurance, or health insurance), or the insurance benefit itself exists within the Real-World.

Type 3 insurance contracts are the inverse of Type 2 insurance contracts. Even if the insured object or the insured person exists in the Real-World or if the insurance benefit is provided in the Real-World, an insurance contract in which the contractual parties (excluding the insured person in some cases) exist and conclude the contract within the Metaverse-World may also be classified as a “Metaverse Insurance Contract.”

However, a Metaverse Insurance Contract should primarily be understood as an insurance contract in which, when a risk materializes, the resulting consequences affect an avatar in the Metaverse (who is designated as the insured or the insurance benefit recipient under the contract). ³¹

Therefore, under the extension theory – which views the Metaverse-World as an extension of the Real-World – the risk in a property insurance contract ultimately belongs to a specific person in the Real-World (typically the insured), and in a life insurance contract, the insurance proceeds generally belong to the insurance benefit recipient. Since the risk ultimately belongs to a specific person in the Real-World, the extension theory would not classify Type 3 as a Metaverse Insurance Contract .

In contrast, under the independence theory, the classification of Type 3 as a Metaverse Insurance Contract depends on the “space definition” established by the Metaverse Operator. Specifically, in a property insurance contract, if the materialization of the insured risk results in consequences affecting the insured avatar, or in a life insurance contract, if the avatar is considered “deceased” under the space definition and the resulting insurance benefit is provided to the insurance benefit recipient, then the contract can be recognized as a “Metaverse Insurance Contract.”

5.5 5.5Risks That May Arise in Type 4 and Corresponding Metaverse Insurance

In the case of Type 4 transaction types, according to the extension theory, which posits that the Metaverse-World is an extension of the Real-World, even if insurance parties conduct transactions in the Metaverse-World or if the insurance object or the insured avatar exists in the Metaverse-World, ultimately, the risks arising from these transactions would be attributed to the insured party or the insurance benefit recipient in the Real-World. This situation combines the characteristics of Type 2 and Type 3 transaction types. In other words, in a property insurance contract, if the insurance object exists in the Metaverse-World, the risks associated with that object would be attributed to the owner of the insurance object, who would be the insured party in the Real-World. In the case of a life insurance contract, the “person behind” the insured avatar becomes the insured party. Therefore, even though it might appear that a life insurance contract involves the insured avatar as the insured party within the Metaverse-World, in essence, the insured avatar is the insurance object, and the “person behind” holds the insurable interest over the insured avatar, making it a property insurance contract in the Real-World.

6 6Conclusions

With this, I conclude my examination of “The Legal Challenges Surrounding Transactions in the Metaverse: The Case of Insurance”.

The findings of this chapter can be summarized as follows: When the Metaverse-World is defined as a separate space from the physical constraints of the Real-World, experienced with a sense of immersion by wearing VR goggles, the legal relationship between the Metaverse-World and the Real-World becomes an issue. There are two possible theories: the extension theory, which considers the Metaverse-World as an extension of the Real-World, and the independent theory, which considers the Metaverse-World as a separate dimension independent from the Real-World. According to the extension theory, avatars are basically regarded as extensions of the “person behind them,” and it is easy to apply the laws and rules of the Real-World to the Metaverse-World. On the other hand, according to the independent theory, avatars and the “person behind them” are considered separate entities, and it is difficult to directly apply the laws and rules of the Real-World to the Metaverse-World. These theories are theoretical concepts, and in practice, there will be differences in degree. However, in the case of the independent theory, Metaverse Operators can stipulate the “space definition” in the terms of use regarding what kind of space it should be. On the other hand, Metaverse Operators bear the responsibility of defining it as a safe and secure metaverse space, which also serves as the basis for the responsibility of Metaverse Platformers.

In the world, there exists both the Metaverse-World and the Real-World. When conducting transactions, the parties involved and the objects (goods) being transacted exist either in the Metaverse-World, the Real-World, or both. This results in four possible combinations. When there is a contradiction between the world where the transaction takes place and the world where the object exists, legal explanations become difficult. Specifically, this issue arises when the object is in the Metaverse-World but the transaction occurs in the Real-World (Type 2) or when the object is in the Real-World but the transaction occurs in the Metaverse-World (Type 3). Furthermore, when both the object and the transaction take place within the Metaverse-World (Type 4), unique legal challenges specific to the Metaverse-World emerge.

The legal issues in such transactions are theoretically linked to how the legal relationship between the Metaverse-World and the Real-World is understood and ultimately lead to the question of the Metaverse Operator’s responsibility as a Metaverse Platformer. Therefore, in order to cover the Metaverse Operator’s liability as a Metaverse Platformer, it is necessary to establish Metaverse Operator liability insurance contracts. This Metaverse Operator liability insurance is a Real-World insurance contract.

Even if a Metaverse Operator does not bear responsibility as a Metaverse Platformer, risks may still arise in transactions of Type 2 through Type 4. Therefore, for each transaction type from Type 2 to Type 4, corresponding insurance transactions can be considered to mitigate their respective risks. In other words, insurance contracts addressing the risks associated with transactions from Type 2 to Type 4 can be developed.

Although the Metaverse-World and the Real-World can be theoretically distinguished, in reality, they influence each other. Furthermore, as these interactions occur, risks may arise within each transaction type. Therefore, in the future, it will be necessary for each country to establish legal frameworks for the Metaverse-World while also developing insurance products tailored to the risks associated with each type of transaction, taking into account the mutual influence between the Metaverse-World and the Real-World.

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Nächstes Kapitel Bringing Trustworthy Robo-Advisers into the Insurance Distribution Process: An Accountability Perspective

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Titel: The Legal Challenges Surrounding Transactions in the Metaverse: The Case of Insurance
Verfasst von: T. Koezuka
Copyright-Jahr: 2025
Verlag: Springer Nature Switzerland
Buch: Emerging Legal Frontiers in Insurance
Print ISBN: 978-3-032-09715-6

Electronic ISBN: 978-3-032-09716-3

Copyright-Jahr: 2025
DOI: https://doi.org/10.1007/978-3-032-09716-3_1

Metaverse is a place for communication, but it is unique in that the method of communication is carried out by the “person inside” the avatar. Even today, communication a take place in a real space, either in person to person, via telephone, fax, Zoom, or other communication devices, or via e-mail, letters (including video letters), etc. In contrast, communication in the metaverse is carried out by expressing oneself in a free avatar that is free from realistic appearance and appearance, just as the “person inside” the avatar wears a costume, so to speak. Therefore, it is technically possible for an avatar to express itself as an animal, an inorganic bottle, a pebble, or whatever it wants to be, regardless of the physically defined gender, age, race, height, or physique of the “person inside the avatar” in real space, and regardless of whether it has a disability.

Unlike the real world, the Metaverse-World requires users to wear VR Headset when checking the world with the naked eye. Of course, the user can check the appearance of the Metaverse-World from a PC screen or smartphone screen, but the space that develops on the PC screen or smartphone screen that the user sees is not sufficiently separated from the real world. This is because the user operates the PC screen or smartphone screen visually while perceiving the real world with the five senses. In this paper, the virtual space in which the user wears VR goggles and feels a sense of immersion is called the Metaverse-World. Such a the Metaverse-World stands in front of the user as a space in another dimension that is separate from the real world with its physical constraints.

It has been argued that the protection of users from harassment and similar misconduct is not aimed at safeguarding consumers per se, but rather at maximizing shareholder value for metaverse platform operators. See, Lee, Yang & Hui (2024), p. 280.

In Koezuka (2024a), pp. 1–30, the author directed attention to the law-generating function inherent in the metaverse world, and undertook an analysis of the theoretical possibility that, contingent upon the manner in which the terms of use – constituting the substance of the user agreement – are formulated, legal personality may be conferred upon avatars. The author further considered that, through the normative effect of such terms, it is also feasible to prescribe insurance contracts pertaining to the metaverse world with freely determined content. Moreover, in Koezuka (2025), pp.320–340, the author examined the proposition that, under the Civil Code, the concept of “death” denotes the extinction of legal capacity, and therefore applies exclusively to “natural persons” endowed with such capacity. Nevertheless, invoking the law-generating function of the metaverse world, the author explored the potential for the concept of an avatar’s “death” to be legally constructed – provided that the terms of use so stipulate – and concluded that, if the defined criteria are met, the “death” of an avatar may be contemplated as a legal notion.

Regarding the relationship between the social implementation of advanced scientific technology and ELSI, the overarching concept should be the social acceptability of advanced scientific technology. Under this, the resolution of ELSI, and in addition, resolution through Risk Management should be considered subordinate concepts. This perspective seems to align with the reality of integrating advanced scientific technology into society. if the social acceptance of advanced science and technology is not increased, it will be extremely difficult to implement advanced science and technology in society. In order for advanced science and technology to be implemented in society, it is necessary not only to solve ethical and legal issues, but also to provide insurance and public funds for the risks that may arise from the implementation of advanced science and technology in society. In other words, this relationship can be expressed as: Social Acceptability > Ethical Issues, Legal Issues, and Risk Management.

For the definition of the metaverse in Japan, see AMT Metaverse Legal Research Group (2022), p. 16; Okajima (2022), p. 1. According to the Center for Research and Development Strategy (CRDS), Japan Sicence and Technology Agency (2025), p. 6, the metaverse is defined as “a new sphere of activity in which interaction, mediated through one’s avatar and transcending constraints of physical location and the human body, is possible, and where the real and the virtual are continuously integrated” (https://www.jst.go.jp/crds/pdf/2023/RR/CRDS-FY2023-RR-04.pdf). The Cabinet Office’s Public-Private Partnership Meeting on Response to New Legal Issues Concerning Content, etc. on the Metaverse (2023), p. 2, considers the metaverse to be “a virtual space accessible through a network and capable of communication between users, particularly those with characteristics such as self-projection, immersion, real-time nature, and openness (accessibility to anyone), or similar”. The Virtual City Consortium (2023), p. 6, presents a common understanding of the metaverse as “a three-dimensional virtual space on the Internet accessed via avatars and Internet services using that virtual space.” Justin (2023), pp.326–327. The Virtual Consortium is an organization formed by the following four entities: KDDI Corporation, Shibuya Mirai Design (a General Incorporated Association), Tokyu Corporation, and Mizuho Research & Technologies, Ltd. Its purpose is to conduct open discussions and research on the development of the Japan-originated metaverse, including the deployment of models similar to “Virtual Shibuya,” an officially endorsed distribution platform of Shibuya City, in other cities, as well as the promotion of new business and technological development, and to formulate guidelines and disseminate information. https://news.kddi.com/kddi/corporate/newsrelease/2021/11/09/5522.html.

A concept similar to, but distinct from, the Metaverse-World is the concept of the Digital Twin. The Digital Twin is a space created for conducting simulations, as real-world simulations are economically expensive. Instead of performing experiments in the real world, a Digital Twin is built to carry out simulations in a more accessible and efficient manner. Therefore, the Digital Twin is defined by the real world and is designed to reflect the real world as closely as possible, which limits its degree of freedom. In contrast, within the Metaverse-World, there are currently no international treaties or legal regulations regarding the construction of Metaverse spaces. Those attempting to build a Metaverse are free to create any space they desire, liberated from the constraints of the real world. Here, we can recognize the “law creation function” of the Metaverse-World.

In Japan, the Cabinet Office has set ten Moonshot goals, aiming to achieve them by 2050. One of these goals is to ‘overcome the limitations of physical bodies and space’. The societal implementation of the metaverse would be beneficial to the achievement of these Moonshot goals. https://www8.cao.go.jp/cstp/english/moonshot/top.html

While the operator behind an avatar – the so-called “person inside” – is an individual, in real-world interpersonal relationships, we are required to engage with others on a continuous basis. Hirano (2012), p.62, p.68. Accordingly, a single individual may be divided into multiple “dividuals” – distinct versions of the self that correspond to particular social relationships – and the aggregation of these dividuals constitutes the self (watakushi). Hirano (2012), p.86, p.89. If such a conceptual framework is accepted, it follows that an avatar in the metaverse world can also be regarded as a form of dividual. Under this view, an avatar is no longer merely a superficial “costume” or external shell. Furthermore, Satō asserts that one’s real-world personality is largely shaped and constrained by one’s physical body, and that, when liberated from the body, even the person themselves cannot fully know what kind of personality their self (watakushi) may assume Satō (2022), p. 222. This suggests that, in the metaverse world, the nature of the avatar one adopts may lead the same self to manifest as a different dividual, thereby enabling individuals to shift or differentiate their personality depending on the specific environment of the metaverse. Satō (2022), p. 220, p.224.

In Japan, the term “virtual”, as used in expressions such as “virtual space” or “virtual world,” is generally interpreted – both in legal discourse and by the public – as meaning “not real” or “inauthentic.” However, such an interpretation is misguided. Rather, the term “virtual” ought to be understood as signifying something that is, in substance or effect, equivalent to its real-world counterpart. Katō (2022), p.172.

In the real world, at the macro level, borders are established between countries, and at the micro level, ownership rights are set for physical assets such as land and buildings (real estate), as well as movable assets like vehicles, precious metals, and other personal property. In contrast, in the metaverse, reality is entirely represented as data in cyberspace, so there are no borders, and ownership rights for physical real estate or movable property do not exist.

In Japan, as well as in other countries, there is no legal framework regarding the rights and obligations of avatars in the metaverse, nor are there any regulations concerning land use within such spaces. At most, regulations are limited to the protection of personal data, regulations related to NFTs or cryptocurrencies, or regulations under general consumer protection frameworks. In the event of a legal dispute occurring in the metaverse, the resolution will likely rely primarily on the existing legal frameworks in the real world. However, it is theoretically important to consider how to understand the legal relationship between the real world and the metaverse. Koezuka (2024a), pp.17–18.

Shimpo (2024), pp.25–28, p.29. Currently, a singing and dancing vocaloid called “Hatsune Miku” is performing live in the Metaverse-World. “Hatsune Miku” is a singing voice synthesizer featuring a female persona with a turquoise twin tail hairstyle who uses Yamaha Corporation’s Vocaloid 2, Vocaloid 3, and Vocaloid 4 singing synthesizing technologies. In a near-future society where the 6th generation mobile communication system (6G) is implemented in society, it is anticipated that many avatars without a “person inside” will appear, such as deceased people and historical figures being revived in the Metaverse-World in the form of realistic 3D avatars and acting by AI. For avatars of the deceased, see Nakagawa (2023), pp.9–13.

There is a high possibility that deceased individuals may be brought back to life through AI avatars. The legal issues arising in such cases are discussed by Matsuo (2024), p. 241. See also,

One of the problems with AI avatars is that, based on the independence theory regarding the legal relationship between the avatar and the “person behind it,” the AI avatar may continue to exist and operate in the metaverse world even after the death of the “person behind it.” It is important how Metaverse Operators incorporate provisions and clauses in their terms of service to address this issue. Matsuo (2024), p. 241. Moreover, it should also be noted that, in the event legal personality is conferred upon AI avatars, concerns have been raised that recognizing such legal personhood may enable malicious natural persons to exploit the system to carry out immoral or unlawful acts. Cheong (2022), p.481.

At the Faculty of Law, Waseda University, a donor-funded course titled ‘Metaverse and Law’ (taught by Professor Tadao KOEZUKA) was offered in the fall semester of 2024, with a donation from Aioi Nissay Dowa Insurance Co., Ltd. In this course, both the professor and all the students wore VR goggles and took on various avatars, conducting classes within a metaverse classroom.

Narihara (2022), p.26. Associate Professor Narihara makes a similar claim in this chapter.

For the terms of service established by Metaverse Operators, see Mori, A. & Tomotsune Law Firm ed. (2024), pp. 174–175.

Koezuka (2024a), p.14. See, Yoshizawa (2023), p.50,.Yoshizawa (2024), p.111.

In addition, there may be intermediate forms of transactions between Type 1 and Type 2. This is where the policyholder, insurer, insured, or insurance benefit recipient all exist in the real world, but the effect of this insurance contract occurs in the Metaverse-World, and the insurance benefit recipient in the real space enjoys that effect. Specifically, this is an insurance contract where the deceased or deceased pets are resurrected in the Metaverse-World.

This legal structure is complex. If structured as a life insurance contract, after the insured’s death, the deceased would be resurrected in the Metaverse-World as a benefit in kind. The recipient of the benefit of the deceased’s resurrection would be the legal representative. There is a question of whether benefits in kind are recognized in life insurance contracts. In this case, the resurrection of a deceased pet is not possible.

Another possible structure is a damage insurance contract. If the insured dies, parents, spouse, or children who have a personal relationship with that person (these individuals become the insurance benefit recipients) receive a benefit in kind as compensation for the emotional distress they have suffered. In the case of a deceased pet, if the policyholder, who is the insured, suffers emotional distress due to the pet’s death, they would receive a benefit in kind in the form of the pet’s resurrection.

See, Mori, A. & Tomotsune Law Firm ed. (2024), pp.173–177.

Professor Kozuka believes that the principles of the real world should take precedence in the event of a conflict between the Metaverse-World and the real world. Kozuka (2022), p.76, p.82, p.84, p.86, p.87.

As for the copyright of items owned by the copyright holders of the items, it will likely need to be stipulated in the terms of use to realize and maintain the “space definition.”

When a Metaverse-World is constructed, there exists an operator responsible for its creation. This operator can leverage the metaverse by allowing users to utilize it, hosting events within the Metaverse-World, and generating revenue by enabling advertisers to place advertisements within the virtual space. If the Metaverse-World is sold to another Metaverse Operator, the purchasing entity then assumes the role of the Metaverse Operator. Of course, an existing Metaverse Operator may also commission a Metaverse Development Company to construct a Metaverse-World on its behalf. Such a metaverse world serves as a platform, similar to how Amazon, an e-commerce company, provides a marketplace where various sellers can offer their products. This type of platform is referred to as a Metaverse Platform. A Metaverse Platform consists of various virtual spaces, each defined in the terms of use under a “Space Definition.” Some spaces function as shopping malls, where different sellers can establish virtual shops and sell their products. In most cases, the Metaverse Operator also acts as the Metaverse Platform Provider, or the Metaverse Platformer.

In a case involving a victim of fraud (Plaintiff X) who brought a lawsuit against the platform operator (Defendant Y) of an online auction service, the Nagoya District Court, in its judgment of March 28, 2008 (Hanrei Jiho No. 2045, p.152), held that: “Under the duty of good faith in the contract of use, Y is obligated to provide the service through a system free from defects for the benefit of users, including X.” Accordingly, the court recognized Y’s liability. This implies that a metaverse platform operator is under a duty to enforce its terms of service and to take protective measures for users against those who violate them. Matsuo (2024), p.20, Mori, A. & Tomotsune Law Firm ed. (2024), pp.99–102 and p.103–104. In Japan, transactions conducted by consumers on digital platforms are categorized as mail-order sales transactions. To protect consumers from malicious vendors, the Act on the Protection of Consumers Who Use Digital Platforms for Shopping (Act No. 32 of 2021) was enacted. Additionally, the Act on the Limitation of Liability for Damages of Specified Telecommunications Service Providers and the Right to Demand Disclosure of Identification Information of the Senders (Act No. 137 of 2001) was amended and renamed the Information Distribution Platform Act (IDPA) in order to facilitate the prompt removal of defamatory or rights-infringing posts on social networking services (SNS).

The question arises as to what constitutes “damage” in the Metaverse-World. Is it the same as the concept of “damage” in the real world? In Japan, under the influence of Germany, it has been traditionally understood that “damage” is the difference (difference theory) between the state of profit that should have existed if there had been no cause of harm and the current state of profit in which harm has been caused. Oho (1972), p. 135.

For example, in the event that all or part of the Metaverse-World is annihilated or rendered inoperable due to a “digital disaster” triggered by phenomena such as solar flares generating electromagnetic pulse (EMP) waves or large-scale, unpreventable cyberattacks, a proposal has been advanced advocating the establishment of a private right of action to provide individual redress (Kennedy (2023), pp.348–349). However, considering the potential for such events to produce catastrophic, transnational harm, it would be legally and institutionally appropriate to implement a comprehensive public response. This should include the creation of a public insurance scheme and the strategic allocation of public funds, with the objective of facilitating expedited disaster recovery and ensuring adequate remedial relief for affected parties. Koezuka (2024b), p.447 et seq.

In China, technology has been developed to meet the needs of those who, in their grief and search for healing after losing a loved one, wish to preserve, create videos of, and even interact with the deceased. However, it has not yet reached a fully completed state. Avatars still appear somewhat awkward and robotic. Nevertheless, this technology has entered a stage of maturity, with at least six companies currently offering such services, and thousands of users already paying for them. Throughout history, Chinese people have found comfort in expressing their innermost feelings to the deceased. In China, the cost of “resurrection” services, also known as “digital immortality,” has significantly decreased, making this technology increasingly accessible to the public. Yang (2024). https://www.technologyreview.com/2024/05/07/1092116/deepfakes-dead-chinese-business-grief/

Under Japanese Insurance Act, if benefits provided by an insurer under life insurance policies or fixed-amount accident and health insurance policies after the occurrence of an insured event are made in kind rather than in cash, such life insurance policies or fixed-amount accident and health insurance policies are not deemed invalid under Japanese Insurance Act. However, since neither of these contracts falls under the definition of an “insurance contract” as prescribed by §2(1) of Japanese Insurance Act, they do not qualify as life insurance policies or fixed-amount accident and health insurance policies under Japanese Insurance Act. Therefore, such contracts are treated as ordinary contracts under the Japanese Civil Code.

In Sato & Ichikawa & Aruga (2023), p.28, p.30, p.44, a detailed explanation of “Death-Tech” – technology related to death – is provided. The paper introduces criticisms that emphasize the inviolability of the deceased, arguing that bringing back the dead and allowing the living to “use” them constitutes a denial of the dignity of the deceased. In my opinion, the deceased are not subjects of rights and, therefore, are not entitled to fundamental human rights. However, with the rapid advancements in cutting-edge technology, if data related to the deceased – such as images, voice recordings, and videos (hereinafter referred to as “data of the deceased”) – is available, it is possible to recreate an avatar that is indistinguishable in appearance from the deceased within a metaverse world. If that is the case, given that the deceased lack legal subjectivity, does it mean that anyone is free to resurrect them using their data? The deceased themselves do not hold any rights over their own data. Typically, their legal heirs would be considered the rightful holders of such rights. In this context, if someone other than the legal heirs, who are the rightful holders, were to revive the deceased without permission, it could constitute an infringement of their rights, potentially leading to liability for damages under tort law. Furthermore, complex legal questions arise, such as whether legal heirs or other rights holders are permitted to alter the personality of the deceased – e.g., changing a deceased father’s personality from short-tempered to kind-hearted using his data. This raises fundamental issues regarding the nature of a deceased person’s personality and whether they possess any posthumous personality rights.

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