Navigating the metaverse and its applications in the P&C industry

The concept of the metaverse, which may have sounded like science fiction not that long ago, is now a tangible reality. Defined as a collective virtual shared space, the metaverse represents a fusion of augmented reality (AR), virtual reality (VR) and various immersive technologies used within cyberspace—and it has captivated the imagination of industry leaders worldwide.

The meteoric rise of the metaverse in popularity over the past couple of years highlights its transition from a niche interest to a mainstream phenomenon. Forbes listed the metaverse as one of the top 10 trends crucial for everyone to embrace in 2023,¹ and it’s projected that the global metaverse market will rise from $65.5 billion in 2022 to $936.6 billion in 2030.² Gartner predicts that more than 40% of major global enterprises will focus on metaverse-centric initiatives by 2027.³

Currently, the commercial property and casualty (P&C) insurance industry stands poised at the threshold of significant transformation, with the metaverse presenting a unique opportunity for the industry to revolutionize customer engagement, develop novel business strategies, mitigate risks and introduce innovative products. Avatars for training and customer support, digital replicas for property underwriting and integration of real-time data provide glimpses into the ways insurers could leverage the metaverse’s capabilities. However, it is important for the P&C industry to recognize the potential risks and challenges that come with the metaverse and take steps to manage them.

Understanding the metaverse

The metaverse is made up of a blend of digital technologies, including VR, AR, blockchain, artificial intelligence (AI) and other innovations.

VR plunges users into immersive, simulated environments, while AR, a less immersive interactive technology, overlays digital content onto the real world through lenses or displays. Blockchain is the backbone of the metaverse, ensuring decentralized and secure transactions and interactions. AI fuels the creation of intelligent virtual agents and chatbots capable of natural language interactions and can analyze vast amounts of data, which enriches the user experience.

Numerous industries are already embracing or are poised to adopt metaverse technologies.⁴ Retail sectors leverage immersive experiences to enhance customer engagement, while virtual meetings and events transform remote interactions. Real estate, architecture and engineering firms benefit from immersive visualizations, facilitating the design of buildings. The software development and manufacturing sectors harness these technologies for innovation and enhanced productivity.

Metaverse applications in commercial P&C insurance

The integration of the metaverse into the realm of P&C insurance heralds a shift in the industry’s landscape, ushering in a wave of transformative applications, including:

• Risk assessment—The metaverse has the potential to be a valuable tool for insurance companies to enhance their accuracy in assessing risks. In the personal lines sector, insurers can simulate and analyze various risk scenarios, considering factors such as home security, accident-prone areas and behaviors. This allows for more precise and personalized risk profiling, enabling insurers to customize coverage and pricing based on individual actions and circumstances. For commercial insurers, the metaverse can provide a more comprehensive assessment of potential risks, considering factors such as cyberthreats, supply chain vulnerabilities and natural disasters.
• Virtual simulations for underwriting—The metaverse can be applied to P&C insurance underwriting processes by offering sophisticated virtual simulations that replicate real-world environments and potential risks. For example, through immersive digital replicas of properties, underwriters can assess variables such as structural integrity, security features and geographical considerations, providing a comprehensive understanding of the insured assets. Insurers can also use the metaverse to train underwriters in a risk-free environment and collaborate in real time to identify improvements, reduce costs and enhance underwriting capabilities.
• Claims processing and investigation—The metaverse presents a new avenue for P&C insurers to simplify claims processing and investigation through virtual environments. Digital replicas can be used by insurers to re-create accident scenes or scenarios involving property damage. This enables claims adjusters to carefully analyze every detail of a claim. As a result, the claims investigation process can be expedited, decisions can be made faster and the need for physical site visits can be reduced.
• Collaboration and training opportunities—The metaverse can help the P&C insurance industry train employees in interpersonal and soft skills, even if they are working remotely. By creating avatars and diverse scenarios, personalized learning experiences can be offered. The metaverse can also provide virtual offices that enable seamless collaboration between employees and clients. These virtual spaces can be used for various purposes, such as idea sharing, job interviews, onboarding, training and performance management.
• Enhanced risk modeling and predictive analytics—Insurers can use the metaverse to create virtual environments that simulate various scenarios, allowing them to develop predictive models for anticipating future loss events. These digital replicas incorporate a multitude of data sources, resulting in more accurate and precise risk models.
• Integration of Internet of Things (IoT) devices and real-time data in the metaverse—The integration of IoT sensors allows for continuous data mapping into the digital realm, which helps to identify risks. Insurers can gather information from various IoT sources to get a comprehensive understanding of risk factors. This integration enables proactive monitoring and assessment, which enhances the accuracy of risk models, claims processing and underwriting decisions in real time within the metaverse.
• Implementation of blockchain to secure transactions—Blockchain, known for its decentralized and secure nature, is the foundation for transactions and interactions within the metaverse. Blockchain’s decentralized and tamper-resistant ledger can be leveraged to record and authenticate insurance transactions, policy details and claims data in a secure and transparent manner.
• Improved work-life balance—AI can automate complex tasks, freeing up human resources for more creative work. Additionally, while virtual collaboration spaces can reduce travel needs and accommodate diverse schedules, immersive experiences in the metaverse can simultaneously enhance communication and foster connection among remote teams. This can lead to improved overall well-being.

Risks and challenges

Venturing into the metaverse can expose the P&C insurance industry to several potential risks and challenges that necessitate thoughtful navigation. These include:

• Privacy—The collection and utilization of extensive virtual data raises privacy concerns and questions about protecting sensitive information and potential unauthorized access. Therefore, ensuring informed consent and establishing clear policies for data handling are crucial in this virtual landscape.
• Security—Security challenges include the risk of data breaches and cyberattacks and the manipulation of virtual assets, which could impact the integrity of insurance transactions and compromise sensitive customer data. Robust cybersecurity measures, encryption protocols and adherence to industry standards are essential to safeguard against these threats.
• Ethical use of data—It’s crucial for the P&C insurance industry to maintain fairness and equity when dealing with virtual information. Discriminatory practices should be avoided at all costs. When adopting metaverse technologies, it’s important to balance the benefits of improved risk modeling with ethical obligations toward protecting privacy and policyholders’ interests. This will ensure responsible and sustainable usage of metaverse technologies in the insurance sector.
  
• Technological limitations and infrastructure challenges—One of the major limitations of integrating the metaverse into P&C insurance operations is the current state of metaverse technology, which may not yet fully replicate the complexity of real-world scenarios, thereby impacting the accuracy of risk assessments. Other limitations include technological and infrastructure issues, such as the need for data storage and processing capabilities. Additionally, interoperability issues and standardization of virtual data formats pose significant hurdles.
• Regulatory and governance—Regulatory frameworks often lag behind technological advancements, leaving a gap in guidelines for the responsible use of metaverse data. The P&C industry must navigate issues related to data ownership, privacy and consent while aligning with existing legal frameworks. Governance structures need to ensure ethical practices, transparency and compliance with evolving regulations.

The transformative potential of the metaverse

The metaverse has the potential to reshape the commercial P&C insurance industry—and many others—offering solutions to age-old challenges. Despite challenges like privacy, its transformative potential is immense. Thoughtful navigation of risks can help drive customer-centric innovation and agile operations, propelling insurers into a resilient, innovative future.