Augmented & VR

While augmented reality and VR are used to access experiences in the metaverse, it is important to distinguish that they are not actually the metaverse. What is here today are the underlying capabilities that will enable the metaverse of the future. For example, VR is being used for training, but it is not immersive 3-D participation like what's found through the metaverse.

Augmented reality provides digital elements over real-world views such as virtual tours of homes in real estate. Many companies have also incorporated augmented reality into their products to make emotional connections with their customers. For example, Disney developed technology that turns coloring book characters into 3-D during the drawing process. The use of augmented reality allows users to watch their drawings come to life, creating a more personalized experience.

In contrast, virtual reality provides immersive experiences that isolate the user from the real world like a virtual museum tour from home. Many companies have incorporated virtual reality into their business plans to help create unique experiences they won't have elsewhere. For example, Toms, the shoes and apparel company known for sending a pair of shoes to a person in need when a pair is purchased, installed virtual reality technology in their stores. This experience transports customers on an immersive 'giving trip' where they can see firsthand the impact that their purchase makes on others.

Using the metaverse for business

It's conceivable that the metaverse could change the way businesses work and operate. For example, the metaverse could allow employees to gather in a digital office, regardless of where they're located, giving them a collaborative space where teams can work. It could also allow for more personalized employee training environments that create an opportunity for employees to learn in a hands-on environment with lower risk. However, while companies make plans for integrating augmented and virtual reality into physical work, they should also evaluate how this technology might add exposures or help mitigate risk overall.

The use of digital twins

A digital twin is a digital model of an environment, product or system used for testing, integration and simulation. The use of this model allows businesses to test in the digital sphere without affecting the real-world counterpart. Here, tangible products are being paired with digital twins, i.e., a physical version with a virtual, intangible product, to test capabilities without impacting the physical environment.

Having access to a digital model could change the way carriers underwrite and manage risk. For example, gaining access to data from the digital twin of a building would allow the underwriter to know intricate details of a property and evaluate the asset's risk perspective from design to potential demolition.

Blockchains and non-fungible tokens (NFTs)

Businesses may have the ability to monetize the metaverse through blockchain technology, which is a digital public ledger. This network records transactions through a decentralized system and creates a fully secure online economic ecosystem within the metaverse to transfer data, currency and assets directly, without the need for a middle person.

The metaverse also offers the opportunity to create digital content where someone can pay for assets, such as photos or videos, also known as Non-Fungible Tokens (NFTs). These tokens prove ownership over an asset either in the physical or digital world. While NFTs are a new sense of trading, it is important to be aware of scams. As this technology is evolving, scammers can adapt and find ways to replicate and fake assets that entice people to invest in their goods without ever providing the item. It is important for investors to verify their assets as scammers are copying collectibles and selling counterfeit NFTs. As scams increase, insurance companies are developing new forms of coverage that protect the inherent risks NFTs have.

Emerging risks to be aware of in the metaverse

Though there have been major advances in the technology industry, businesses should remember that the metaverse is relatively new and not yet fully understood. However, there are some emerging risks that have become clearer:

• Maintaining data integrity — Employees should be certain that the information being received is accurate and has been fully reviewed by trusted sources.
• Verifying identification — As scams increase, it's essential to conduct proper background checks of all business partners and vendors.
• Understand capabilities — It's important to monitor digital components and be ready to catch a mistake before it has a large effect on business, especially as technology becomes engrained in daily tasks.
• Provide transparency — When interacting with customers, it is crucial to provide the appropriate warnings and disclaimers on the technology. Customers should understand that while this technology is exciting, there are many unknowns that must be considered.

Insurance for the metaverse

With so much that is still unfamiliar in the metaverse, companies have a lot to explore. While it is advantageous to be open to this new technology, it would be wise to be cautious with its implementation.

Insurance has general liability that covers property damage and bodily injury, as well as property coverage for physical damage and cyber policies for intangible things, which are typically three separate policies. However, with the metaverse, insurance carriers have to contend with a world where these three distinct coverages are merging. Businesses must understand that there is a lot that insurance carriers still need to explore in the digital space. In addition, as companies consider integrating the metaverse and its new technology, it would be practical for business leaders to be cautious to ensure decisions are well-informed in order to help protect their company from risks.

Andrew Zarkowsky is Technology Industry Practice Leader for The Hartford. He has more than two decades of experience in insurance, holding various leadership roles in underwriting. Michael Kearney is Head of Emerging Technology & Innovation for The Hartford. He has more than 30 years in technology roles as a software engineer, CIO, and management consultant. For more information visit www.thehartford.com.

Related:

• Privacy and cybersecurity risks in the metaverse: 5 steps to protect your data
• The future of virtualization and touchless claims