The Metaverse appears to be a playground for many of us, where our digitized selves can explore an entirely new world. This is something that many of us find appealing. We can inhabit digital communities and shop for things exclusively available online. We don’t have to worry about the number of calories when we consume digital ice cream cones. We can go to new digital clubs and hang out at new digital sights while on vacations. It has an incredible ring to it.
There are many benefits to insurance on Metaverse, and the possibilities for loss are enormous. Insurers will be able to maximize profits by allowing consumers to insure their virtual assets in a unique and immersive environment.
For many people, insurance on Metaverse will be the only way to protect their digital assets and mitigate losses. In addition, insurance premiums on the Metaverse have real-world value, and this means that consumers can save on premiums and still be covered in the event of a catastrophe.
The insurance industry will have to adapt to new technology. For example, a blockchain-based system for insurance will make it possible to store and manage data from various systems. This will improve the security and privacy of the process, and allow people to recover from digital losses. However, insurance providers will need to overcome several barriers in the process, including HIPAA, which protects confidential health information. For these reasons, it is essential to build a secure and safe infrastructure for healthcare services on the Metaverse.
In a recent report, Z/Yen outlined the opportunities and pitfalls of insurance on Metaverse. While the benefits are clear, risks remain unclear. As the technology evolves, it may introduce new political and socio-economic risks. In addition, the system will likely be hosted in the cloud, making dispute resolution extremely difficult. In the long run, insurance on Metaverse could become a major player in operations in the digital world.
How Insurance Works In Metaverse
While the Metaverse is still in its infancy, the insurance industry is well-positioned to participate in it. The first step is to build parallel systems that transfer the daily activities of an insurance company to the Metaverse.
By building a user experience that is immersive and streamlines digital processes, prime insurance brands can flourish in the future. Ultimately, this means that the insurance industry will re-emerge with a refreshed facade and an essential role in the operations of the new, digital world.
The insurance world is investing heavily in technology, and it can be a valuable asset for the industry. Insurtech companies are already investing heavily in the Metaverse, which means it’s a great time to start looking at this new technology. If you’re planning on investing in the metaverse, you’ll be able to use it as a source of revenue. There’s no doubt that the metaverse will become the largest platform for financial transactions.
Currently, insurance on the Metaverse has limited impact on the industry. It is likely to be a tiny part of the $650 billion net written premium of the physical world. In 2020, it will generate $12 billion in net underwriting profit. Until then, it’s an unknown, but a great opportunity for those who wish to invest in the future of insurance on the Metaverse. When it’s adopted, it’s likely to change the way healthcare companies do business.
We will have to accept that the property we own, the health of our avatars, and the data that makes everything possible must be protected. Because our lives in the Metaverse will be valuable, wherever there is value, there is danger.
Impact of the Metaverse Insurance Companies
Each user interacts with the metaverse via an avatar, which can be thought of as a “second self” that represents the person in a virtual environment.
Insurance companies can interact with customers’ avatars using their avatars and offer experiences free from the limitations of reality (for example, simulated incidents such as fire, natural disasters or hospitalization).
A “new economic sphere” is a thriving virtual economy where blockchain-based transactions involving virtual assets like cryptocurrencies and non-fungible tokens (NFTs) happen more frequently and in higher volumes than ever before, eventually growing to a size comparable to financial transactions in the real world.
Future economies will include digital data representing virtual land, buildings, and other property as a standard component of an individual’s economic assets, necessitating insurance for those assets.
The ability for insurance companies to include NFTs and crypto assets in their investment portfolios is also coming.
In this article, we look at the potential business prospects for the insurance value chain as a result of the growing pervasiveness of the metaverse, as well as the skills insurance companies will need to take advantage of these chances to increase consumer value properly.
Insurance in the Metaverse
The Metaverse gives off the impression of being a digital playground, where our digitized selves can go adventuring in an altogether different universe. We are able to inhabit digital communities and shop for things exclusively available online. We don’t have to worry about the number of calories when we consume digital ice cream cones. We are able to go to new digital clubs and hang out at new digital sights while on our vacations. It has an incredible ring to it.
Michael Mainelli and Simon Mills explain in their paper titled “The Metaverse & Insurance – Pixel Perfect?,” published in January 2022, that “risk management in the Metaverse is no different than risk management in the real world.” There is still a place for traditional insurance practices. There will be a demand for specialized insurance solutions for applications of the Metaverse, such as protecting personal data and digital assets or insuring against the risk of long-term physical or mental injury.
If we are going to explore or live in the Metaverse, here are suggested different types of insurance we might need first. Among these are protection for one’s virtual property, one’s business, one’s health, and even one’s life.
Digital Assets Protection
Residents of the Metaverse can own property on three levels: personal, commercial, and business. The dangers that can occur in their virtual property are identical to those that can befall them in the real world if they choose to become property owners. On either side of the computer, there is the possibility of suffering a loss.
Sales of virtual real estate are expected to reach over $1.9 billion by the year 2022, as predicted by MetaMetriks, a provider of metaverse land analytics.
These monies do not consider the digital property that individuals are already buying and selling in the online realm. Even though these assets aren’t physical, they still have worth, so it’s essential to ensure they’re adequately protected with insurance.
Personal Data Protection
Data representation of every person in the Metaverse creates a significant opening for the information to be stolen.
Residents of the Metaverse will be required to protect the data they save by purchasing insurance products that are analogous to cybersecurity plans used today.
The type of data covered by the insurance will be the defining factor. Virtual regulations will likely need to protect not only the data that surrounds a digital person but also the data that constitutes the digital person.
Risk Control And Prevention Protection
Because the majority of the dangers associated with functioning in the Metaverse have not yet been identified or found, the insurance sector benefits from developing methods that will assist virtual inhabitants in avoiding risk in the first place.
Instead of paying residents of the Metaverse compensation for losses, insurers will benefit from designing coverage that incentivizes people to take precautions against potential dangers.
Physical And Psychological Harm
The harm that could befall an avatar is not entirely understood, although the possibility of suffering some “data injury” exists. People who devote more time and money to constructing their avatars will require access to virtual health insurance to protect their virtual health.
Furthermore, existing health insurance policies may need to be rewritten to cover the physical and mental problems caused by using virtual-reality computers and components, as well as sitting in a fixed posture for lengthy periods.
We are aware of the health hazards associated with long periods of immobility, but as more individuals enter and remain in the Metaverse, musculoskeletal and cardiovascular disorders and obesity are likely to become more prevalent. Furthermore, loneliness and isolation will exacerbate mental health problems.
The Future of Insurtech and Fintech
For more insight about insurance on metaverse, listen to Professor Michael Mainelli and Simon Mills, Z/Yen group webinar on: The Metaverse and Insurance