The term “metaverse” doesn't refer to any specific type of technology but rather a broad shift in how we interact with technology. Extensively speaking, the metaverse when talking about technology companies can include:
Virtual reality - is characterized by virtual worlds that exist.
Augmented reality - combines aspects of the digital and physical worlds.
However, those spaces are not necessarily required to be exclusively accessed via VR or AR. Virtual worlds, such as aspects of the Fortnite game that can be accessed through PCs, gaming consoles, and even smartphones, have started referring to themselves as “metaverse.” As a core network technology, the Metaverse’s potential will evolve by combining with technologies such as machine learning (AI), malware, widespread surveillance, and quantum computing. Many companies envision the “metaverse” as a new digital economy just like the NFTs, where users can create, buy and sell goods. This anticipates can be considered a good opportunity by Insurance companies.
Generally, Insurance is an agreement by which a company guarantees compensation for loss or damage for payment of a specified fee called a Premium. Metaverse is already creating new types of transactions and ownership models, a need for different insurance products and services (like smart contracts), and policies and regulations for this unique and diverse environment.
How it all started?
As we all know metaverse is a virtual world where risks and threats exist, just like the real world. What will happen if crimes are committed on the metaverse? Many remember the first virtual crime when furniture was stolen in the Habbo hotel, and the perpetrators of this crime received real-world arrests. This is where the insurance concept in the metaverse steps in.
Insurance offerings that are being applied to the Metaverse include:
• Professional indemnity/technology liability
• Cybercrimes
• Directors and officers liability (D&O)
Key areas to be covered to develop the insurance sector on metaverse:
In a real world where we can possess tangible goods, insurance is very much defined by it. But in a virtual world like the “metaverse,” this can be a challenge as everything is intangible. This is where Insurance companies must think out of the box and develop new ways to identify the damage or loss for a customer.
To come up with new ways, first, we need to understand how a “metaverse” works, and it can be classified as:
• Economy – where buying and selling of services takes place
• Synchronicity – participants interact with others in real-time as they do in real world
• Availability – uptime of the virtual world
• Interoperability – use of virtual assets across different sites within the metaverse
• Persistence – access to contents in the metaverse at any time and from anywhere
These are the key areas where companies must try to identify different insurance schemes for any loss or damage to the services provided.
Risks involved:
Although it’s a virtual world, this whole metaverse must have hardware on which the software runs, like the VR/AR headsets, for an immersive experience.
Other scenarios where insurance can show impact are:
• Data Privacy – with lots of interactions in the virtual world comes too much data, and it must be protected from theft or hacking
• Data localization – restrictions of data to specific geographical locations
• Intellectual Property – taking care of copyright and intellectual property rights
• Virtual assets – like NFTs, metaverse can bring new kinds of virtual assets in future
The insurance industry must resolve these issues to take metaverse space to conduct business and provide cover for its risks. Along with these, there would be virtual policies for the metaverse and the contracts that are digitally signed and transacted in cryptocurrencies. Insurers could use this digital twin to assess risk, pricing, claim adjustment, and continuous monitoring. Insurers can offer metaverse cover as an extension or add-on to traditional contracts or as a separate policy. They should examine policy wordings in both cases to ensure that real and virtual world risks are distinctively specified.
There is already movement, though:
The YuLife app, the most rewarding life insurance product in a virtual world, is built like a game and includes the virtual GP in which users can “level up” through quests, challenges, and duels to access new levels and boost their YuCoin count. This already looks like an example of Meta insurance offering.
UK insurtech Hubb is the first Metaverse-ready broker, already interacting as a business and with customers in facilitating the onboarding of new staff by providing instant access to the senior teams more productively than video meetings while still allowing workers to operate from home.
Final thoughts:
The metaverse concept could take more than a decade to mature, and it can be a blockbuster hit or a flop. Irrespective of the scenario that unfolds in the future, insurers need to be built around the customer, capable of creating new experiences and interactions, able to make new products fast, and underprop all of this with the benefits cloud and fully open to integrations with insurtechs, other partners, new payments and they should also adapt to the risks providing required coverage to both the customers and the companies that run the metaverse.
Name: Sri Harshitha Panangipalli
Batch: 2022-24
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