Why insurers should care about the Metaverse, web3 and virtual worlds

The “Metaverse” is a hot topic right now that often gets confused with “Web3” or “virtual worlds,” and sometimes is seen as just “something gamers do.”

While it’s an often over-hyped term, insurers are beginning to wonder what it is and ask themselves whether or how soon it will be a big topic in insurance.

To open up the topic, unpack it, and start exploring what it all means to insurers, David Cushman, HFS’ practice leader for emerging technologies, and James Yerkess, founding partner at HAL Consulting, in a Linkedin Live session, which you can watch below.

So, what is the Metaverse?

The Metaverse isn’t:

  • meta. That’s just the Facebook group trying to look cool and relevant. Reflecting their huge investment and belief in the emerging Metaverse(s) and removing the association with the poison of their algorithms and a business now designed principally to generate ad revenue.
  • fully formed. It is instead a series of islands or “walled gardens,” as Dave Wallace recently suggested. Like big gaming environments such as Fortnight, with more than 350 million registered users worldwide. Suggesting that until you can walk from one environment to the other, it’s not some sort of interconnected virtual world, but it could be. And there are things like crypto scaling and various applications of these technologies and models in other industries. And as James says in the Linkedin Live session: there are builders and participants, so it is always evolving.

The Metaverse is…

  • the use of advanced technologies, principally AR & VR, to create immersive virtual worlds, which can offer an alternative to your in-person life.
  • in its infancy, with a long way to go. But whilst there are signs we are in a hyperbole, it is being heavily invested in and growing fast.
  • inter-related with the term “Web3 and Web 3.0,” which are used to define the next generation of the internet. It’s often also characterised as a connected, data-driven, decentralised smart web. If Web 2.0 was characterised by the emergence and dominance of cloud-based tech, mobile and social platforms, Web3 will be all about AI, ML, and high-speed computing. This is, of course, potentially challenging for regulated financial services and insurance businesses.
  • inclusive of meta concepts, like cryptocurrencies and NFTs. In fact, in some ways, they make more sense in this context (unless you’ve made money out of these Ponzi schemes). The technology ecosystems that Web 3.0 is being built on – such as blockchain, cryptocurrencies, NFTs and DeFi – are all geared toward an open, permissionless internet. This essentially removes the need for oversight from trusted third parties, giving users more control over any content or assets they create.
  • an environment that you likely need VR and AR to access, which creates barriers and limitations at this stage.

What does the Metaverse have to do with insurance or insurers?

I typically answer this based on three factors:

  • It’s a new way of interacting. And like a new channel or method of engagement, it offers huge interest and in this particular case a lot more opportunities for deep, engaging, and interconnected experiences.
  • There are new risks and insurance potential in meta things (more on this in later articles).
  • It will already impact existing insurance offerings (like Cyber or small and medium-sized enterprises), and a new competitive landscape is already emerging.

Let’s dive into some of this then:

Whatever your view on the future of the Metaverse, it’s already creating new types of transactions and models of ownership, a need for different insurance products and services (like smart contracts), and a need for policies and regulations for this new and different environment.

Insurance offerings that are immediately being applied to the Metaverse include:

  • Professional indemnity/technology liability
  • Cyber
  • Directors and officers liability (D&O)
  • Crime/Specie

But there are also new risks that need to be understood:

  • The Metaverse could create new socio-economic and political risks.
  • As the Metaverse is likely to reside in “the cloud,” fully open, dispute resolution might be difficult.
  • As a core network technology, the Metaverse’s potential will inevitably be multiplied by combining with technologies such as machine-learning (AI), quantum computing, malware, or widespread surveillance.
  • What will happen if new crimes are committed? Many will remember when furniture was stolen in Habbo Hotel, and the perpetrators of this first virtual crime received real world arrests.

There is already movement, though:

Take the YuLife app, which is built like a game and centred on the “Yuniverse,” a virtual world in which users can “level up” through quests, duels, and challenges to access new zones and boost their YuCoin count. Seems like a Meta insurance offering to me.

Hubb could be the first Metaverse-ready broker, already interacting as a business and with customers in this way.

What might stop insurers from making the most of the Metaverse?

Well, insurance doesn’t have the best track record of embracing new things, and I don’t think it has been their fault. Technology has historically let them down. Built around policies and largely how insurers are structured today, this has created lots of restricting factors. 

To allow Meta insurance to be “bettah-Insurance,” (sorry!) insurers need to be built around the customer, capable of creating new experiences and interactions, able to build new products fast, and underpin all of this with the benefits cloud and fully open to integrations with new payments, insurtechs, and other partners. 

These ecosystem-enabling factors will allow insurers to move into the Metaverse, build relationships, and evolve their offerings. 

Just as other industries and societies have needed insurance, the Metaverse will need insurance and insurers to create the right environment. And as insurers become increasingly embedded, human and planet centred, and focused on risk prevention, there will be many ways in which this could make the Bettah-Meta-verse (sorry again!).

For all insurers today, this means a solid commitment to innovation and tech adoption. This will be crucial when it comes to reaping the rewards of our real and virtual future. And EIS is here for it!

Watch the LinkedIn LIVE session below:

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