March 27, 2023

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The hype around the metaverse has been matched by the millions of dollars being invested by big Tech and big business.

With Walmart recently announcing its entry on the online gaming platform Roblox, the message to B2C and B2B companies alike is that they need to be involved – but in what exactly? There’s confusion around what the word actually entails and some are actively seeking to avoid it in favor of a clearer definition. Disney, for example, talks about next generation storytelling and an experiential lifestyle platform, crafting its own narrative around the future of entertainment, while investors in Meta are perhaps casting a shadow of doubt over Mark Zuckerberg’s vision after a disappointing series of results which saw billions wiped off the firm’s market value.

So if it’s hard to have a conversation where everyone is on the same page, how can our industry come up with dedicated metaverse insurance solutions?

We might have hundreds of years’ experience in property insurance, but how do we approach covering real estate that exists as a non-fungible token (NFT) and the contents of a meta-villa by the sea including luxury goods such as a virtual Birkin bag. And as many of us can’t live without our pets, virtual pet ownership now a reality, so what sort of cover should pet insurers deliver?

“Understanding the intersection of physical and digital worlds and evolving insurance policies to deliver solutions now is where the current opportunity lies – and then flexing those solutions to evolve with Technology will ensure our industry stays ahead of the curve.” – Michael Brunero

Rather than getting caught up in the hype, I think the insurance industry needs to try not to look too far into the future.

Essentially, we’re seeing a handful of Tech companies providing immersive worlds for users to engage with others – and when you boil that down, it’s really just the internet entering a new phase in 3D. So let’s simply consider the opportunities, the pitfalls and the issues surrounding this new phase.

The opportunity lies in understanding the base technologies in the metaverse. And Technology doesn’t just appear overnight in a great big bang. It typically evolves from existing Technology so we should be questioning whether we are currently providing adequate policies to manage the complex exposures of virtual and augmented reality where digital and physical worlds are already combining a new way.

For example, what new risks come with esports that may not exist with traditional sports and are we delivering cover that is fit for purpose? If not, where do we need to improve? The worlds of healthcare and finance have already begun their transformative journey of digitization, so insurers should be focusing on providing adequate solutions now before considering the immersive potential of these industries that the metaverse may afford in the future.

Understanding the intersection of physical and digital worlds and evolving insurance policies to deliver solutions now is where the current opportunity lies – and then flexing those solutions to evolve with Technology will ensure our industry stays ahead of the curve.

But as we all know, alongside the opportunity there are pitfalls.

We’re already seeing legal issues in these new virtual worlds that the insurance industry should be mindful of – but again, before we look too far into the future and try to create policies for virtual property assets that are yet to materialize in any great way, we should focus on solving the problems we have for clients now to provide the platform for the future.

How would existing policies react if a customer claims that they have been assaulted in a virtual world? As crazy as that might sound, a researcher studying user behavior in Meta’s Horizon World through her VR headset was sexually assaulted within an hour – apparently while other users looked on. This has resulted in much discussion about how virtual experiences are just as traumatizing as in the physical world because of the intense, immersive nature of the virtual world. But immersive technologies have not created harassment in the digital world; social media has long been a breeding ground for bullying and stalking so this is simply the evolution of existing issues and we need to question whether current policies are delivering adequate protection.

Equally as more industries deliver products and services over Tech platforms, the old question of ‘is software a product or a service’ is cropping up again. The only relevance this has is which insurance policy picks up the claim, so if we haven’t developed solutions already, then our industry is well behind the curve considering how long software has been in our daily lives.

And intellectual property (IP) exposure goes hand in hand with any advances in Technology – be it a brand new development or a traditional business digitizing their operations and proposition. It’s not just a case of managing and protecting IP; as competitors move into new virtual worlds then they’re going to fight hard for market share. IP litigation is almost a given. It’s an area that the industry has been involved with for decades now, yet it’s still an emerging risk and one that we need to address properly now if we’re to offer adequate solutions in the virtual world.

Returning to all the hype that surrounds the metaverse, NFTs are often heralded as the answer to ownership of virtual assets – yet NFT sales fell by 60% in the third quarter of 2022. Opensea, the world’s largest NFT marketplace, has said that more than 80% of NFTs created for free on their platform were plagiarized works, fake collections or spam. This could mark a watershed moment, ending the speculation associated with these assets and ring in an era where we can more accurately assess what place they have for the long term – if any.

Diving into NFTs would be problematic for insurers given their volatility. Rather, the wiser path lies in having a strategy around the evolution of assets which may have a role to play in the metaverse.

The digital age has spawned industries previously unimagined. The vast opportunity to become famous as a fashion blogger, Tik Tok star or Youtuber is substantiated by an influencer marketing industry expected to be grow to $16.4B this year.

This is big money, but many of these businesses which started out from home with an iPhone, have failed to appreciate the risks that come with operating online. There are plenty of examples of influencers having their accounts being held ransom for example, not having thought that a cyberattack on their business could cripple it. Other influencers have faced IP infringement litigation having using unlicensed images or music without consent.

Creating policies that are fit for purpose for these industries as well as finding ways to communicate to a new audience often unaware of their varied exposure is a priority. This is even more crucial as we seek to understand what new enterprises the evolution of the internet will bring with it.

The biggest challenge for insurers right now is detangling the fact from the fiction, the hype from the reality, worrying about building products or solutions for an industry that doesn’t eventuate, or takes longer to evolve than perhaps anticipated.

Brands are focusing on creating a presence in the metaverse to connect with and build their consumer base for the future. With so much innovation and creation happening in the space, the greatest asset businesses have is their IP and this will increasingly generate disputes with the core of a business at stake. Understanding the importance of protecting these assets is a real education opportunity for clients in the space.

My view is that we need to keep our finger on the pulse but be cautious, not too trigger happy, and focus on the value we can provide now. Go back to insurance 101: know your client, who they are, what they are genuinely trying to achieve, what their risk exposures are. Trying to build metaverse specific products without truly understanding what that means will expend time, energy and resource for very little return.

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