New horizons – Insurance in the era of the metaverse

It’s certainly one of the largest gambles on the future that we are seeing today. A trend that will revolutionise almost every area of our professional and private lives. And is already being talked about as a market worth trillions. We’re talking about the metaverse. A merger of accessible, virtual worlds where there will no longer be any spatial or temporal restrictions. Where people can move freely using their avatars. And which also offers tremendous potential for the insurance industry, says ERGO CDO Mark Klein.  

They happen again and again: innovations that are so far-reaching that they divide our world into a “before” and “after”. That are more than the evolution of existing technologies. And that go beyond the disruption of business models because they don’t just change traditional systems, they enable completely new ones. These sort of innovations are called “quantum leaps” because they entail dramatic progress rather than gradual change. Historical examples include the movable printing press, electricity and the internet. 

A core feature of quantum leaps is that they can’t actually be planned. Their frequency can vary, because it depends on many factors – for example the sector involved, technological development or the economic environment. But when a quantum leap actually happens, it generates tangible benefits. Not only for its developers, but also for society at large. That’s because quantum leaps don’t just change the world – they also improve it. 

The metaverse: an interoperable ecosystem of virtual 3D worlds

Many of these factors also apply to the metaverse, an interoperable ecosystem of virtual 3D worlds. Where there are no longer any boundaries between platforms. Users can move seamlessly between digital applications – just like moving from one room to another. And where you can easily take digital goods with you in this digital world. This all happens in real time, even if the users are no longer active; this means that the metaverse is synchronous and permanent. It’s the next iteration of the internet. And it turns the two-dimensional screen version into an accessible, three-dimensional space.

In technical terms, the metaverse builds above all on base technologies such as virtual, augmented or mixed reality, blockchain and artificial intelligence. The key factor here is that the metaverse is not a single technology, but an ecosystem of technologies. Only when they are combined can we create the immersive, interactive space where we will move around in the future. And for which there are already grand visions. 

New opportunities for communication, education or cooperation

For example, there are plans that will see the metaverse creating entirely new opportunities for communication, education or cooperation. It will be a place where people shop, go to concerts or visit exhibitions. Industrial companies will be able to work collaboratively in the “industrial metaverse” and work on digitalised production processes in real time. Stadiums such as the Etihad Stadium in Manchester will have digital twins so that remote spectators will also have a spectacular experience. There will no longer be any spatial or temporal boundaries in the metaverse. It will be a fully functioning digital parallel world to which we will not only relocate parts of our social, but also our value-creating interaction. And the potential that lies behind it is immense. 

According to McKinsey & Company, the value of business involving the metaverse is already projected to reach five trillion dollars by 2030. Of this figure, e-commerce is forecast to be the largest economic driver, at 2.6 trillion dollars, followed by virtual learning at 270 billion dollars, advertising at 206 billion dollars and gaming at 125 billion dollars. There have already been major rounds of financing for platforms that plan to offer metaverse experiences or services. From fashion companies to energy suppliers, a large number of sectors are already seeking advice on how they can leverage the metaverse for their own benefit in the future. And a race running into the billions has long since broken out between tech giants such as Apple and Meta to decide who will be the first to implement their own vision of the metaverse. The most recent development here was the launch of the Apple Vision Pro mixed reality headset just a few weeks ago. 

Tremendous opportunities for the insurance industry

So the metaverse offers tremendous opportunities that the insurance industry can also leverage. For example, insurers have many use cases along their entire value chain that can be implemented here. In the area of product management, for instance, entirely new forms of product development and configuration are imaginable. New product categories that are tailored to the virtual world could emerge. For example, virtual property insurance against the loss or theft of virtual goods in the metaverse. We could see liability insurance products for developers of virtual objects or for virtual events – to name but a couple of ideas.  
 
Sales and marketing could use the metaverse to make insurance products an immersive experience. What was previously abstract and theoretical could be made graphic and accessible by the metaverse. For example, if customers are shown a visual representation of potential risks, which would also allow the relevance of coverage to be conveyed again by different means. In cases like this, the metaverse offers opportunities for innovative ways to approach potential customers and for immersive storytelling. 

The metaverse could also be used in HR for virtual learning and training. There could also be a recruitment process that is not limited just to virtual interviews, but also includes digital job fairs. A presence in the metaverse could allow insurance companies to position themselves to the young, digitally aware target group that is very difficult to reach using traditional communication channels. But which constitutes the next generation of potential customers and employees. 

VR use cases at ERGO Group

Even this handful of examples shows that the metaverse offers a wide variety of opportunities ranging from new forms of collaboration, through new sources of revenue, stronger customer loyalty, more successful branding, down to developing new target groups. That’s why at ERGO, we have been working closely for years to identify the use cases that could arise in the metaverse for us as a company and for the insurance industry. For example, we recently implemented a VR experience app that allows customers for the first time to immerse themselves virtually in an insurance scenario and provides them with advice about this in real time – including potentially signing a contract. And: we have already rolled out a VR sales training programme for around 500 sales staff per year, hold our meetings of divisional heads in the area of digital transformation using virtual reality and have already invited attendees to international networking events on our own digital campus. 

It is absolutely clear to us that what we have seen of the metaverse so far is no more than early days. And that it will take a while and additional software and hardware to turn the metaverse into a holistic haptic experience. We will need additional technical standards to achieve genuine interoperability between platforms. The technologies that underlie the metaverse must first become socially accepted and established. And, of course, there will need to be legal and regulatory frameworks for the digital space and the necessary investments in use cases and devices.  

However, the worst mistake that companies could make would be not to start actively engaging with the issues already but to sit back and wait. That’s because you can only proactively adapt and leverage technology trends if you identify and understand them at an early stage. The metaverse will fundamentally change the way how insurance services are offered, experienced and managed in future. It has long emerged from the hype cycle and can make a quantum leap forward at any time. Insurers would be better prepared in this scenario. Because the world after that will be a different one.

Please note: This article was first published by Versicherungsmonitor.

Text: Mark Klein, CDO ERGO Group AG