How insurers can respond to the metaverse and new technologies

Accenture’s Insurance Technology Vision 2022 outlines how the metaverse continuum will impact the industry over the next decade. New frontiers of possibility have opened up, from unreal digital environments to the exponential opportunities of quantum computing. Let’s uncover what this means on a practical level, and how insurers can respond.

Insuring the unreal

Insurers will be increasingly called upon to insure ‘unreal’ digital environments, taking advantage of the plethora of new currencies and products in this space, and helping clients to ward off digital threats. Consider the example of AXA France, which announced the purchase of a site in the metaverse of The Sandbox (SAND) to learn and get used to these platforms and communities as soon as possible. However, with new landscapes come new risks. As bad actors take advantage of new attack surfaces, insurers will need to step in to help mitigate these threats. For example, one of the challenges Ethereum faces is the ability to trust smart contracts. Since mid-2016 there have been three high profile hacks of Ethereum smart contracts as well as many smaller ones. To address this need Nexus Mutual has developed Smart Contract Cover, a product that is designed to pay out claims if there is ‘unintended code usage that results in a material financial loss’. Members of Nexus Mutual share risk with each other by pooling their funds together and deciding as a group which claims are valid. The mutual is fully run and controlled by its members with any surplus from cover purchases being owned by the members.

Ultimately, to thrive in the unreal world the metaverse presents, insurers will need to be aware of the opportunities and risks this new landscape provides in order to grow strategically and act on behalf of their customers. There is still a lack of trust among insurance consumers in digital-only experiences. For this reason, insurers will need to also establish strong omni-channel experiences so that customers have the security that these insurers operate in both digital and physical worlds.

How can insurers respond to the metaverse?

These developments pose the question – how can insurers respond effectively and bridge the gap between the present and the future? There is no doubt that the metaverse continuum will elevate expectations for how insurers interact with customers, what products and experiences they design and distribute, and how they operate their organizations. While many of the technologies are not novel on their own, there is a revolutionary convergence of emerging and maturing technologies in the metaverse—including artificial intelligence (AI), augmented and virtual reality (AR/VR), blockchain, digital twins, edge technologies, cloud, digital currencies, non-fungible tokens (NFTs), social platforms, ecommerce, and digital marketplaces. As they intersect, these technologies give rise to innovative ways for people and organizations to interact.

Parametric insurance products that cover metaverse-specific risks offer one of the biggest opportunities for insurers, e.g. digital assets like blockchain-based tokens and NFTs. According to Chainalysis, fraudsters stole over $7.7 billion worth of cryptocurrency in 2021, an 81% rise from 2020. (Pg. 11 Insurance Tech Vision)

The metaverse could also bring about a revolution in how consumers and insurers do business with each other. What is often lost in the digital environment is the personal feel of face-to-face interaction. The metaverse has the power to replicate the trust of the agent sales experience, offering brand value and access to new customer segments who prefer to interact in this way.

The metaverse will also have an impact from an internal process point of view.?Experimentation with VR/AR as a way to train and upskill the workforce is already underway in certain carriers. As metaverse technologies mature, these efforts will lead to more comprehensive experiences. Training simulations, where customer service agents can learn how to navigate difficult conversations with customers is just one area of huge potential. For example, ERGO has created a metaverse landscape with the living rooms of various customers for the soft skills training. Ida Fuchs was also developed as a virtual mentor who sits on the customer's couch. As a coaching avatar, Ida gives advice around the training conversations.

In the metaverse, an insurer can also vividly show employees, individually or in a collaborative virtual group, what to look for in the aftermath of a building fire or a natural catastrophe. In order to deliver on this vision of the metaverse, insurers will need to introduce new skillsets to the workforce. The domination of the metaverse by gamers in this early stage translates to a demand for increasingly creative content and experiences. Therefore the metaverse continuum will be shaped by new and unique combinations of technology and human creativity.

A plethora of new skillsets spanning previously unseen roles in insurance such as 3D artists, game designers, art directors and storytellers will be required to deliver new training and customer service experiences.

Insurers will also need to be mindful of the regulatory challenges the metaverse poses. Insurance customers in the metaverse will be subject to many of the physical world’s norms, and insurers will be expected to help users engage safely with all kinds of virtual experiences. Insurers will need to weigh up freedom of expression with safety concerns. The implications will be felt across every part of the insurance value chain. The spread of social media exemplifies how the introduction of new platforms can give rise to ethical, reputational, and legal risks that we don’t yet know about. Therefore, insurers will need to be ahead of the curve when it comes to new risks and regulations.

Quantum computing possibilities for insurance

Quantum computing is defined as a rapidly emerging technology that harnesses the laws of quantum mechanics to solve problems too complex for classical computers. In this context, complexity refers to an almost unimaginably high volume of variables interacting in complicated ways. This has huge potential for application in the insurance industry, with quantum computers bringing new capabilities in processing large insurance datasets from multiple sources and transforming the way the industry approaches risk-modelling and decision making. Insurance has the depth and breadth of data to inform powerful intelligence – quantum computing simply accelerates this ability at an exponential level.

What is the practical impact of quantum computing? The three key fields of application across industries include optimization, machine learning algorithms, and sampling & simulation. In insurance, some of these challenges might include optimizing insurance and investment portfolios, regulatory constraint optimization, risk calculations, natural catastrophe modelling and pricing. AXA is one of the first insurance companies in the world to start experimenting with quantum computing. They are exploring breakthrough technologies to address future needs. The impact of quantum computing in insurance is only just being felt, and the evolution will continue.

In conclusion

The metaverse continuum and new technologies will bring exciting new shifts in the way insurers do business, some of which have yet to be imagined. ‘When Atoms Meet Bits’ is Accenture’s new Technology Vision 2023 and it picks up where last year’s left off, calling out how the metaverse is a watershed moment for the convergence of atoms and bits, or the digital and physical worlds. It makes the case that the next wave of business transformation will shift from building isolated digital capabilities to creating a shared reality that will seamlessly combine our physical and digital lives. When atoms and bits collide, truly new possibilities emerge. As insurers, this is a very exciting time where we need to try to plan for both the possible, and what is not yet possible in the metaverse and beyond.

Get in touch to discuss the potential for the metaverse in your business.