Insuring the metaverse – a day in the life

We predicted in our recent article The (continuing) rise of insurtechs that insurtechs are well-placed to capitalize on the future digital sector given they are more nimble and digitally focused than traditional players. This includes the frontier-land of the metaverse.

It is anticipated that technological advancements will ultimately allow our virtual and physical worlds to morph into one all-encompassing world which promises to change everything from the way we work, the way we shop and how we transact in many aspects of our lives. The metaverse is a central pillar to this new world.

At this point in time, insurtechs have had a limited impact in the metaverse. This is primarily due to the infancy of the metaverse which means that there are still many unknowns faced by its users, in particular how to value and protect non-physical assets. Insurtechs continue to grapple with cyber security risks (including how cyber policies can cover specified non-physical losses) and that is only one element of the risks faced by metaverse users.

There are insurtechs starting to take the journey into the metaverse and the wider digital asset world – for example superscript offers “innovative, smart and transparent insurance for web3 businesses, including NFT and Metaverse projects”, Hong Kong’s OneDegree has a partnership with Munich Re to offer a digital asset insurance product and insurer hubb is using the metaverse to establish a hybrid working environment. We are watching closely as to how these insurance products will develop and the challenges they will undoubtedly face. Insurtechs will need to demonstrate an unwavering commitment to innovation in order to profit from our soon to be integrated real and virtual future.

“The Metaverse is for an insurer the best dream and the worst nightmare. A world where you can monitor everything, have the data and assess risks, and at the same time a space where the security and control is highly uncertain. ”

Source: The Metaverse & Insurance, Pixel Perfect? January 2022, Z / Yen Group

Now to imagine a day in the life of a metaverse user and how insurance could play a key role in protecting them against the risks the digital world brings.

8:00 – 8:30 am (Metaverse Time): The NFT Job

Having spent the weekend roaming the digital art galleries of Decentraland – the 3D world where you can do anything from buying virtual land to playing crazy golf – as an art aficionado, I was delighted to come across an exclusive NFT. After outbidding all participants in a virtual auction, I became the proud owner of a cartoon ape with laser beams shooting from its eyes. Enthusiasm sadly not shared by friends outside of the metaverse, who couldn’t quite understand its appeal. Safe to say their invitations to my virtual dinner parties will be lost in the virtual mail. But for those who do appreciate great art, I hung the NFT front and center on the walls of my virtual home for all to admire.

There won’t be much admiring going on though. Not only have I just discovered the luxury yacht in the garage of my metaverse mansion has been vandalized and my ‘MetaBirkin’ handbags have been stolen but also that my prized NFT has been taken from its frame. This is a monumental disaster. My only hope now is for my metaverse insurance policy to respond. I open my metaverse insurance policy app which contains details of my metaverse assets and their unique digital IDs (including my new NFT as a specific listed item) and have been able to quickly select the stolen assets and upload pictures. Thankfully my metaverse insurance policy covers damage to virtual real estate and theft of digital assets – my cyberpolicy can restore the data to its original condition. Thank you metaverse insurer.

11:00 – 1:00 pm: Network Outage

I have just received another piece of rather fabulous news from my metaverse insurer: the earlier claim on my policy for an unexpected network outage also came through.

A few weeks ago, I had organized a music event called Glaston’VR’y, featuring some of the metaverse’s biggest artists such as Ethereum Sheeran, whose slogan is that he sings the ‘catchiest verses in the metaverse’. I was hoping to earn a lot of money from the concert through both ticket sales and selling NFT memorabilia and virtual flyers at the event. However, a network outage crashed the event just as the avatars of the artists were walking on stage. Talk about bad luck ?! My insurance policy means though, I have been able to recover the lost revenue from ticket sales due to the cancellation of the concert. This is a big win for me, and all of the sudden, the rather expensive bespoke metaverse music promoter policy from my metaverse insurer seems entirely worthwhile.

3:00 – 5pm: Virtual Insurer Office

I check my crypto wallet to make sure my claims for the NFT theft and network outage have been paid. Just when I think my day can’t get worse, to my shock, I find that my crypto wallet has been emptied – presumably stolen by hackers. I jump on my virtual hoverbike and fly to the metaverse offices of my insurer, I need to speak to someone in-person about this. I storm through the virtual underwriting room, where underwriters and brokers alike gather to offer their services to clients, and make my way to my insurer’s office.

I enter my insurer’s office (today set to a tropical beach background with the gentle sound of waves lapping against the shore, presumably to calm irate customers like myself) and proceed to share my latest grievance regarding the scurrilous behavior of the criminals of the metaverse. My insurer checks my account and, after commenting that my premiums are likely to change due to the activity on my insurance policies today, reassures me that the hacking of cryptocurrency wallets is included in my policy and that the funds would be returned to my account by the time I log back on to the metaverse tomorrow. My insurer recommends that I unwind by playing some VR games to take my mind off the day’s events. Sounds like a good plan to me.

6:00 – 8pm: VR to ER

‘The trend of crashing into furniture while in the metaverse provoked a 31% jump in home contents claims involving VR headset in 2021’ – insure Aviva

I take my insurer’s advice and put on my Occulus headset to play the newest VR Spider-Man game. As I swing from skyscraper to skyscraper in New York, I begin to feel better about my metaverse woes, and I come to accept the fact that I will face a lot of risks in such a new, unregulated digital space, especially for someone with as many digital assets as me.

Unfortunately, the game proves to be too immersive. As I set off in hot pursuit of criminals in the VR world, I jump from the Empire State Building head-first into my real world TV screen. As I clutch my head in pain, my wife calls the ambulance and all I can think about is how to recover the costs for my broken TV. From my hospital bed I log into the metaverse via my smartphone and make another visit to my insurer. He insists that ‘we have to stop virtually meeting like this’. I was worried the damage to my TV would be accidental damage and excluded from scope of coverage but fortunately my policy covers VR-related accidental damage and I am truly thankful that I took out the most comprehensive digital insurance policy available – I’ve certainly made good use of it today!

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