Metaverse: Revolution or evolution? And where does insurance come in?

The concept of a Metaverse is not new. In fact, the underlying technology trends have been underway for many years. But as immersive technologies such as Augmented and Virtual Reality (VR/AR) mature, and with tech giants betting heavily on its future, the buzz around this "old" technology has exploded.  

Opinions of a fully immersive Metaverse are divided. For starters, there is no clear and fully agreed definition of the Metaverse today. Some would even argue that "the Metaverse" as such does not even yet exist and what we see today are precursors of Metaverses – virtual worlds that exist but not interconnected.

It is unlikely that the Metaverse will fundamentally change the insurance business, but insurers are already dipping their toes in. US-based private insurer IMA Financial Group has established an insurance and risk management research and development facility in Decentraland, a browser-based 3D virtual world, which will look into risk mitigation specific to non-fungible tokens (NFTs). 

Korean Insurers Hanwa Life has a virtual financial planner named Hannah who helps customers find more personally tailored services while also helping employees work more efficiently. AXA has acquired land in Sandbox, where it provides “immersive experiences around sustainability, wellness, healthcare” among other things.  And at Swiss Re, we have also begun to experiment with off-the-shelf Metaverse applications.     

The way we see it, if and when a truly connected and fully immersive Metaverse materialises, it will create new opportunities in terms of customer experience, product design, distribution, customer service and operations. 

It can enable insurers to provide better customer experience, enhance retention and connect with savvier user communities. One such example that already exists is YuLife’s attempt to gamify insurance, which has captured the attention of at least one-third of its base of 400,000 customers. The Metaverse is also set to be a game-changing platform for employees' engagement, talent retention and development.

That said, with all the hype around the Metaverse, the current attitude of insurers seems to suggest a less enthusiastic and cautious approach. In fact, many insurers are only starting to figure out its application. 

Currently, there is no coordinated approach within the industry around the Metaverse. This means that we are facing a mushrooming effect where multiple Metaverses are being developed in parallel, without interoperability between them. Providers are fragmented and the long-term viability of today's existing Metaverses are not clear. 

The usability of what exists today is another problem. Many of these new digital environments developed are rather hard to navigate, with outdated or unappealing graphics. Supporting devices such as VR headsets are expensive for private users and clumsy, and the digital capabilities of consumer products (e.g., CPU, high speed broadband) are not widely available yet to support a fully digital world. 

There are multiple barriers to overcome before the Metaverse can fully capture the interest of consumers and gain traction especially as the Metaverse is still in its nascent stage with a relatively small number of users. 

As with any innovation, the Metaverse comes with risks. Without clear rules, the digital economy bears financial risks such as debt with digital currencies. A potentially untraceable virtual world could provide room for more and larger scale fraud, polarizing events (such as hate speeches), and other illegal activities. 

The advancement of Artificial Intelligence (AI) could also result in increasingly realistic computer-generated avatars that's hard to distinguish from real human ones. This could create confusion and users could easily fall victim to scams or identity theft.

Mental and physical health risks are also concerns. If a parallel life were to exist on the Metaverse, it would mean spending longer hours in the virtual world – be it sitting in front of screens or through headsets. This could lead to health issues like obesity and a cluster of related conditions like heart diseases, diabetes etc. 

Increased social isolation could also cause mental and behavioural issues like anxiety, depression and potentially developing antisocial behaviors. On the flip side, avatars can offer disabled or challenged individuals a new form of interaction which would not have been possible otherwise. 

Not every application of the Metaverse is foreseeable. It’s entirely possible that new technologies will change the conversation around the Metaverse in the years to come. What’s clear is that it is an emerging area for the insurance industry. While some uses (sales and education) pose little risk, developing new insurance products could be difficult because of the complexities of the Metaverse.

The current pace of uptake gives us the space and time we need – for insurers to experiment with its application, and for regulators to explore what are the right guardrails for the Metaverse.