The metaverse presents insurers with game-changing opportunities and risks (Charles Taylor)

Wed 9th Nov 2022

Insurance Day Article: The metaverse presents insurers with game-changing opportunites and risks

Source: Charles Taylor website, News & Insights / By Charles Taylor InsureTech Expert

The metaverse is predicted to be worth $13trn by 2030, more than double the value of today’s entire global insurance industry.

With tech giants and big businesses investing billions in the metaverse, insurers must start thinking about how to take advantage or risk seeing others take their virtual place.

There will be a need for very different insurance products in the metaverse!

The metaverse is predicted to be the biggest technological change since the creation of the internet.

It encompasses the merging of the physical with the digital world through the application of different technologies. It will offer an immersive, interconnected virtual world in which users can share experiences and interact in real time, which will fundamentally change the way we live and do business. From new products to immersive customer experiences, the metaverse presents insurers with game-changing opportunities and risks.

Big businesses are already investing millions of dollars and the metaverse is predicted to be worth $13trn by 2030, more than double the value of today's entire global insurance industry at $5.4trn. Insurers cannot afford to miss the huge opportunities this paradigm shift presents, nor can they ignore the risks.

There is a need for very different insurance products in this new world. On a personal lines level, people will have digital avatars that will wear digital fashion and live in digital homes. What happens when someone hacks into the digital home and steals their possessions? There may be a need to insure digital "buildings" and "contents", even though there is no tangible asset to underwrite.

There is a real opportunity to develop dedicated metaverse insurance products. These could be similar in nature to today's data breach and other cyber insurance products but tailored to the metaverse's specific risks. This could extend to include protection products, such as coverage for the avatar to protect users and their data directly.

Customer Insights

The metaverse may enable insurers to gain a singular view of the customer for the first time. In this new data-driven environment, it could help insurers understand their customers better and get closer to them. This could help foster more personalised solutions tailored to the individual's risks.

There is real potential to improve the customer experience in this new world. Policyholders could, for example, visit claims handlers or contractors in the metaverse to track the progress of their claims, creating engaging, differentiated claims experiences.

It could also help educate buyers. It is an ongoing challenge that people often do not understand what they are buying when they purchase cover and the metaverse could change this. Simulations could also help insureds better understand the coverage they are buying by walking them through frequent types of losses that would not be covered, for example.

However, the shift in power dynamics could make it harder for insurers to access non-customers' data. In this "user-centric" version of the internet, each person's digital "avatar" would hold all the data on their identity, lifestyle and experiences.

This data would have a value for the user and could potentially be sold to insurers and other providers in return for personalised products and services. Years ago, it was common for life insurers to have to charge for quotes to cover the cost of the medical, but this is unheard of now. If insurers are unable to access data through third parties, they may have to consider charging for quotes again, which would be far from ideal.

A New Way of Modelling

The metaverse is a perfect environment to build, test and explore 3D models of the real world. This has a multitude of applications for insurers; loss adjusters can feed videos or pictures from live claims into the simulations and, harnessing artificial intelligence and quantum computing, build a 360-degree view of each claim, and test and tweak loss scenarios remotely.

Similarly, insurers and brokers can model risks in 3D to help insureds mitigate losses and underwriters can simulate physical risks and scenarios to improve risk pricing and selection.

Insurance has historically faced a real challenge to recruit the best talent, despite thousands of us happily working and staying in the industry for decades. Psychologists predict the metaverse could dramatically change the workplace and help employers offer a better recruitment and employment experience.

Interviewing, onboarding and training new staff could all be handled virtually in a consistent, engaging environment. And with many feeling webinar fatigue, the metaverse could also provide an engaging hybrid environment for conferences and networking events.

These virtual workspaces are expected to overcome some of the challenges of hybrid working, bringing people together from anywhere across the world, building organisational cultures and enhancing learning. We know remote working has made over-the-shoulder" knowledge transfer harder, but the metaverse could reverse that by giving inexperienced employees access to the mentors they need plus additional tools and resources.

This could help firms create engaging work environments to attract the best talent and close the skills gap, which could be just what the industry needs.

It will be some time before the metaverse is properly regulated with established standards and best practices. In an unregulated environment, there will inevitably be misuses, abuses and disruptive behaviours that could have financial, reputational and security repercussions for insurers. This presents a significant challenge for insurers and business generally, but it is an issue that must change and regulation will be developed in time.

The metaverse represents a new challenge for insurers but also an incredible opportunity. With tech giants and big businesses alike investing billions in this new world, insurers must start thinking about how to take advantage or face watching others take their virtual place.

Charles Taylor InsureTech Expert