By: Kirti Damle, Sr. Specialist, Service Design, LTIMindtree

A perspective on the impact of Metaverse on the insurance industry

The insurance industry will experience a revolution with the development of the Metaverse world. We have already witnessed mobile, social media, digital and cloud transformations. But the Metaverse revolution will be unparalleled to all the changes we have witnessed. The insurance industry must initiate a massive shift to adopt the Metaverse world and bank upon the premium benefits of early technology adoption.

As per Bloomberg, “the three-dimensional virtual world has the potential of about USD 800 billion in 2024”. Gartner expects that by 2026, 25% of people will spend at least one hour a day in a metaverse for work, shopping, education, social media and/or entertainment.

We are already witnessing a conducive environment and how the industry is moving towards Metaverse. The emergence of 5G technology, AR/VR headsets (such as oculus), and exuberant investments from technology giants is driving this revolution faster. As of now, Metaverse is popularly used for gaming, entertainment, tourism, education, and virtual land deals.

For example, JPMorgan opened a lounge on Decenterland, Coca-Cola held a party on Decenterland, K-pop and Animoca have formed a joint venture – AniCube entertainment to bring K-pop artists to The Sandbox. K-pop also launched one of its music albums through Zepeto. Fashion brands like Gucci, Dior, and Nike have moved their line of products to Zepeto where users can try brands virtually. UAE-based Metaverse Holdings has selected Dubai and Abu Dhabi as the first cities to be launched within the ‘world’s first virtual world’ to replicate true, real-life experiences and places. Users globally will be able to experience Dubai and Abu Dhabi’s greatest attractions and landmarks alongside real-world utilities from the comfort of their homes – merging the physical and digital world. All these Metaverse platforms like Decenterland, The Sandbox, Zepeto, etc. generate revenue using the cryptocurrencies with blockchain principles. The user base of Metaverse platforms is increasing every month by millions. Let’s understand what it means for insurers from business use cases, technology operations perspective and how the insurance industry has already embarked on the Metaverse journey.

Metaverse for Insurance Industry- Key Use Cases

The emergence of 3D virtual worlds will also change today’s insurance operations massively. Today only 1% of the market is e and hence there is huge growth potential and to cover new risks. Below are a few examples of possible Metaverse for the Insurance industry use cases from a business operations perspective.

• The KYCs will be virtual with AR/VR headsets where  insured will get an immersive experience
• The immersive virtual simulations of accidents, risks covered, etc., will become mainstream to market various policy products
• Enabling a virtual distribution system where insurers might need to invest in virtual lands or open virtual shops, conduct virtual events for marketing and distribution
• The loss evaluationcan be done virtually in case of fire, flood, etc. and this will help in speeding up the claims settlement process in the Metaverse insurance ecosystem
• The insurance offeringswill extend to the risk coverage of virtual assets like – virtual land on Metaverse, NFTs (Digital assets), general liabilities for virtual businesses using cryptocurrencies, etc. innovative insurance policies, such as Seguro GO (developed specifically for Pokémon Go players), which target specific demographics could help insurers reach a new generation of customers. From 2017 to 2020, a quarter billion dollars were lost due to bugs in smart contracts of the blockchain ecosystem. Insurers can participate in covering such losses for auditors or Metaverse platform providers.
• The specialty insurance coveragewill have more demand for virtual artwork, exhibitions, events, launches and shows in the Metaverse insurance industry
• This will also lead to new offerings by reinsurers to cover special risks in Metaverse insurance. The magnitude of risk will grow significantly and hence there will be more demand for reinsurance
• The premium paymentsand loss reimbursements will be made through cryptocurrencies and the ledgers will be maintained using blockchain in Metaverse for insurance
• Further, there will be a need of integrating virtual/ meta worlds into existing 2D digital worlds and it will be the true explosion of technology. For example, integration of the current policy admin system with Metaverse to deal with Metaverse transactions

TechOps changes to adopt Metaverse in insurance

From technology operations perspective, insurers, brokers, reinsurers, P&C players, life and health players, etc., need to adopt the below changes ahead of time.

1. Applications compatible with Metaverse

• Rationalize legacy applications and make those compatible with Metaverse insurance industry – policy administration, claims, billing, insights, etc.
• Extending data lakes to gather data from Metaverse platforms
• Apply analytics based on data received through Metaverse
• Alliance and integration with particular Metaverse platform
• Work with specific cryptocurrencies supported by Metaverse platform selected

2. Hardware and software Readiness
Insurers will need to partner with certain Metaverse platforms and accordingly need to invest in compatible hardware.

3. User training and readiness
Training for internal users – employees, and operational staff will be required. Some end users will also need training and education to operate their insurance policies through Metaverse platforms. There will be a need to establish helpdesks to address Metaverse queries.

4. Compliance
Apart from traditional regulations of each nation/government/ union, DAOs will play a vital role in defining rules which may differ for each Metaverse. Complying with those rules will become essential.

5. Supporting multiple cryptocurrencies
Insurers will need to support the multiple cryptos based on the Metaverse platform selected and report those in the single currency to track operations effectively.

6. IT Security
Security will be the biggest concern in conducting insurance business operations on Metaverse. Insurance companies will need to invest more to protect customer data, to identify genuine users/ customers, user authentication and avoid malicious attacks.

7. Customized user experience
Experience starting with more customized avatars, which customers can better correlate with based on gender, nationality, cultural choices, etc. Also, more customized premium offerings will drive revenue growth of Metaverse for insurance.

Impact of Metaverse on Life, Health, and P&C Insurance

Below are examples and effects we will witness in the near future.

1. Hubb, a UK challenger insurance brand, has announced it is the world’s first Metaverse-ready insurance broker. The company, founded in 2019, is a disruptive challenger broker that aims to correct the declining levels of service and value in the broker world through the delivery of transparent, usage-based broking. Edward Halsey, COO, Hubb explained, “Not only do we now conduct our board meetings in Horizon Workrooms, but we have already engaged with clients via this kind of Metaverse-driven technology. By becoming the first Metaverse-ready insurance broker, we’re ensuring that we won’t miss an opportunity to put clients at their ease – wherever they are and whatever their preferences.”

2. Heungkuk Life Insurance is the first life insurer to join the Korean Metaverse alliance. The ‘Metaverse Alliance’ is a ‘K-Metaverse Alliance’ hosted by the Ministry of Science and ICT as part of the government’s digital new deal policy. About 300 member companies, including Samsung Electronics, SK Telecom, and Woori Bank, are participating. Through this partnership, it is expected that Heungkuk Life Insurance customers will be able to visit their agency using a virtual reality (VR) headset.

3. MaxLife has already started investing in the concept of Metaverse Insurance and they are building immersive experience with employees to provide facilities, roundups and webcasts and down the line it will be extended to customers. Divyan Kavdia, VP MaxLife “I believe technologies like NFTs will be the next level of evolution for the life insurance sector. Things like digital certificates, death certificates, living certificates—how do you ensure that these are not tampered with? NFTs are used to own up a piece of art or an underlying asset. Can we have insurance setup for a product created for these things?”

4. For Health insurers, the digital data explosion induced by Metaverse will help in providing more customized covers. The insured will store their health data using crypto wallets and may share it with caregivers on a need basis. When scheduling a medical appointment in the Metaverse, a person may log in to their provider platform with their crypto-wallet and choose which elements of their health history to share. Physical hospitals will become meta-hospitals where individuals get access and help from the best caregivers across geographies. Individuals can earn or acquire insurance tokens by completing preventative care measures and behaving in ways that support health. These tokens can be used to buy down premiums or beyond healthcare to support lifestyle enhancements.

5. Aviva UK property claims director Kelly Whittington said the insurance claims increased by 31% last year due to VR Damages. Property and casualty underwriters could use the new technology to examine assets without needing on-site, reducing costs and better-assessing risk. Underwriters need to thoroughly understand the nature of the risk and price it accurately. Metaverse technologies will provide underwriters and loss adjusters with a more granular and accurate view of the risk involved through effective simulation.

To conclude even though Metaverse sounds like a remote imaginary world, the insurance industry has already embarked on the Metaverse adoption journey. The early movers will witness humongous growth in terms of revenue, premium rates and market share.