Digital insurance in the metaverse

In the real world, in exchange for the payment of a premium, the insurer provides compensation to its client when the latter has a claim within the framework defined in the insurance contract.

The insurance covers both material losses, such as property, and immaterial losses, such as reputational damage.

In the metaverse, a tool that is by definition virtual, immaterial claims of all kinds may occur in connection with:

• crypto currencies used by avatars,
• game currencies such as V-Bucks in the game Fortnite,
• the tools used in games such as Minecraft (where the player shapes his own environment) as well as any virtual object that could be destroyed or damaged according to the control logic offered by the domain of any metaverse.
  In this last case, the "NFT" would be concerned, that is to say the "Non-Fungible Tokens" which are very rare virtual goods. Cars, real estate, companies, health, virtual lives can also be affected.

Creating new insurance products in the metaverse

Currently, the strategy of insurance companies is confined to developing a metaverse around their brand, a strategy consisting in building user-centric engagement by providing an immersive digital experience.

In fact, insurers are seeking to automate, streamline and digitize every step of this process. Some insurers are already using this approach and are taking a technological option ahead of the rest.

Creating a virtual insurance policy would be a first step toward distributing a product in the dematerialized world of the metaverse.

Companies developing a brand or setting up a store in this virtual world, as well as individuals looking for personal coverage, would be able to purchase insurance to meet their coverage needs. The latter would be granted according to the criteria existing in the real world (quality of the insured, level of commitment, quality-price ratio...).

Metaverse and Emergence of new risks

As access to augmented reality and virtual reality increases, new risks concerning data security and health appear. Insurance companies and banks are trying to develop these innovative niches and services by guiding individuals and companies to them.

To understand the usefulness of insurance, it is important to keep in mind that digital twins are considered the basis of the metaverse. Digital twins are the virtual representation of the real world, of all physical objects, processes, each person, relationships between people and behaviors.

In the virtual world, avatars are therefore used to correspond to the image of oneself as a form of identification. Users will then use an avatar that is linked to their own identity and is equivalent to their physical representation in the real world.

Identity theft

In 2019, 14.4 million U.S. consumers were victims of identity theft, that is, about 1 in 15 people. So, the possibility of identity theft in the virtual world is quite conceivable. Identity theft in the metaverse is possible through two means:

• traditional identity theft for the purpose of accessing the victim's credits or possibly committing nefarious acts.
• the theft or hijacking of a virtual identity, that is, the usurpation of other avatars with the aim of impersonating someone else in the virtual world, with all the consequences that may follow.

Identity theft, therefore, stands as a new opportunity for insurance companies to expand their innovative product offerings.

Insurance dedicated to augmented reality games

One of the first insurance policies associated with an augmented reality game was set up to protect Pokémon Go players when it was released in 2016. Fans of this game must walk in real life to catch beings called "Pokémons".

These Pokémons are viewable on mobile devices while walking through cities. However, walking while looking at a cell phone or tablet in the middle of pedestrian or vehicular traffic is dangerous.

To solve this problem, the Mexican company Jiro y Asociados Seguros developed an insurance policy for Pokémon Go users. This policy offered policyholders and Pokémon Go players coverage against accidents, injuries and death triggered by the game.

Development of Metaverse Alliance

Heungkuk Life Insurance (Corée du Sud), une filiale du groupe Taekwang, annonce en août 2021 rejoindre l'Alliance Metaverse. C’est la première société d'assurance vie à rejoindre l’Alliance Metaverse qui regroupe environ 300 entreprises membres, dont Samsung Electronics, SK Telecom et Woori Bank.

Heungkuk Life Insurance prévoit le développement d’une offre de services pour les personnes nées dans les années 80 et 90, familiarisées avec la réalité virtuelle grâce à une collaboration active avec des entreprises innovantes de l’Alliance.

While some insurers are taking their first steps into the virtual world, it takes time for the metaverse to spark a true revolution in the industry. To attract more insurers, the metaverse:

• should be more flexible,
• become more of a multiple platform,
• should acquire a larger scale and curb the creation of small independent virtual worlds,
• seek the collaboration of key industry players: governments, insurance companies, banks, other large entities, and nonprofit organizations.

Once these conditions are met, prospects (companies and individuals) seeking insurance will be able to more easily enter the metaverse to perform multiple transactions such as underwriting insurance, reporting a loss, etc.