By Wouter Bosschaart, Aon director, strategy and technology group 

Insurers are venturing into the thriving digital landscape of the metaverse, covering virtual assets, safeguarding intellectual property and protecting the wellbeing of users and avatars.

With this evolution comes new challenges and the unique opportunity to shape the future of insurance.

The rise of the metaverse has brought about a host of new possibilities, creating a multitrillion-dollar economic value and transforming intangible assets into valuable commodities.

Aon analysis estimates gross written premium potential related to the metaverse in excess of $US20 billion by 2030.

The current range of insurance products within the metaverse is limited, with non-fungible token insurance taking centre stage.

However, as digital economic activity burgeons, (re)insurers will find themselves presented with opportunities to cover virtual assets, fortify against cyberattacks and even provide liability insurance.

The (re)insurance industry therefore faces both great potential and challenges with the growing metaverse – from new coverage offerings, including virtual property, to even mental and physical health concerns.

There are two distinct types of metaverses under development. The first is a centralised metaverse that relies on users leveraging extensive technology infrastructure provided by major corporations.

The second is a decentralised metaverse built on blockchain technology. This empowers customers with ownership of their own data, fostering a more direct relationship between users and businesses. 

The opportunities: insurable aspects of the metaverse 

Intellectual property: Insurers play a role in safeguarding creators’ rights and mitigating potential infringement risks. Insuring against IP claims within the virtual realm can help protect digital assets and the value they hold for creators.

Non-fungible tokens: NFTs, which authenticate ownership and uniqueness of virtual assets, have gained significant popularity in the metaverse. These digital tokens represent a wide range of collectibles, artworks and virtual goods. Insurers can explore opportunities to provide coverage for NFTs, ensuring owners are protected against theft through hacks of user wallets or IP infringements through purchasing patent-protected NFTs to protect these valuable digital assets.

Mental and physical health: Spending significant amounts of time in the metaverse can have an impact on individuals’ mental and physical health. This is highlighted by cases where people neglect real-world obligations, such as caring responsibilities, due to their preoccupation with the virtual world. Insurers can offer coverage for virtual-related mental health issues and address physical ailments resulting from excessive digital engagement.

Virtual property: Virtual real estate is already being bought and sold for substantial amounts, with some properties worth more than $US2.5 million ($3.69 million). This presents an opportunity for insurers to offer coverage against potential risks, such as virtual property technology error and omissions, for the businesses and consumers using virtual spaces for commerce.

Avatars and virtual health: The wellbeing of avatars within the metaverse has become an essential concern for users. Individuals may spend thousands of dollars creating, growing and nurturing their avatars. At this level of emotional and economic investment, insuring the life and health of avatars becomes crucial to protect the investment in their digital identities.

Challenges and considerations

Risk assessment and pricing: Determining appropriate risk assessment methods and pricing models for insuring virtual assets and health within the metaverse poses a challenge for insurers. Creating data-driven approaches to assess risks and determine fair premiums in this unique realm requires innovative risk assessment and exploration of new data points, such as pen tests and stress tests of system architecture of various metaverse platforms.

Legal and regulatory frameworks: The metaverse raises questions about jurisdiction and legal governance. Establishing applicable legal and regulatory frameworks that accommodate the complexities of this virtual realm is crucial for insurers to ensure compliance and provide effective insurance solutions. Defining the boundaries of insurance coverage within the metaverse is an ongoing challenge.

Data and security: Insuring virtual assets requires robust data protection and cybersecurity measures. Insurers need to invest in advanced technologies and collaborate with experts in cyber forensics to secure sensitive personal and commercial data. Doing so will help prevent unauthorised access leading to cyber or crime events that could impact users’ virtual assets and user experiences.

Defining insurance boundaries: Distinguishing between insurable risks within the metaverse and those inherent to gaming or other industries requires careful consideration. While insuring virtual property and avatar health seems reasonable, discerning what falls under traditional insurance models versus aspects covered by gaming industry solutions poses challenges that insurers must navigate.

Four ways for insurers to prepare for the metaverse now

As the metaverse continues to develop, insurers must stay aware of emerging trends, adapt to evolving technologies and actively participate in shaping the future of insurance in this virtual realm. Here are four ways to help get started.

Define a clear strategic vision: put trends on your radar and update your view annually.

Assess market opportunities to shape the strategy: translate opportunities you see into a gap analysis. Ask yourself, do you have exposure already, and if not, do you have an appetite for it?

Align internally and develop operational plans: match operations to future trends. Invest in nimble underwriting platforms that can adapt to shifting client needs, and ensure you have access to talent that understands the trends in depth.

Establish KPIs and implement: align strategic project management with your long-term goals. Tweak your underwriting appetite annually to gradually grow into a trend.

The metaverse presents an exciting and growing opportunity for insurers to expand their offerings and cater to the evolving needs of users. By offering coverage for virtual assets, intellectual property, NFTs, avatar and human health, and mental wellbeing, insurers can play a vital role in safeguarding users’ investments.

However, addressing the challenges posed by risk assessment, legal issues, data security and defining insurance boundaries within this unique digital realm will require innovative solutions, collaboration and careful strategic planning.

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