5 MINS READ
INDUSTRY
Insurance
Reinventing the Insurance Industry with a Digital-first Strategy
Highlights
- When talking about the next big thing after the internet, the metaverse wins hands down.
- Having found immense use in the gaming industry thus far, the metaverse is poised to redefine the contours of various industries, insurance being one.
- A few obvious use cases would be sales and marketing, customer service, and most importantly, claim surveys and loss assessment.
- Interestingly, the relation between the metaverse and the insurance industry will be bilateral in nature. The ‘world’ that the metaverse creates will have some use for insurance.
In this article
A new reality
The term ‘metaverse’ was first coined in a science fiction novel some three decades ago where the characters were envisioned as avatars in a virtual world.
It has evolved since then, albeit with just a limited presence among gaming and technology circles. The COVID-19 pandemic, however, accelerated the need for its adoption, and a few strategic moves by big tech organizations like Facebook and Microsoft made it a buzzword overnight. Metaverse is expected to be the next big thing after the internet, and many organizations across industries are working toward creating immersive experiences for their users and customers. The insurance industry has ample opportunities to leverage this technology in its business activities and generate revenue by managing risks in the virtual world.
Metaverse for insurance
Insurers can leverage the metaverse in their day-to-day business functions to improve customer and agent experience, increase operational efficiency, and reduce costs.
Let us examine some use cases:
Sales and marketing: Life and property and casualty (P&C) insurers can adopt virtual reality (VR) platforms to explain their products to customers and prospects by demonstrating through examples from real life. This will help customers understand the products better and enable them to choose the right protection for their needs. VR platforms can also be used to train agents and service representatives on various processes and procedures in the insurance life cycle.
Customer service: A middle eastern nation’s government agency has created a virtual customer service center in the metaverse where customers can get their queries addressed, submit documents, and make payments. It is just a matter of time before other industries including insurers follow suit. The best part about this is that customers can get the experience of a brick-and-mortar store without visiting one. This service is especially useful for the elderly and people with disabilities, who are more at ease in a face-to-face interaction.
Underwriting and claims: Introducing extended reality (XR) can help underwriters inspect an asset – be it auto or home – in sufficient detail without having to visit the site. Similarly, claim adjustors can inspect the damages being claimed before settling them. Combined with artificial intelligence (AI) and past accident history, it can even simulate and recreate the scene, thereby enabling claim adjustors to identify fraud.
Health and wellbeing: The metaverse can be used to improve the fitness and well-being of insureds. Insurers can assist individuals in reaching their fitness goals and targets by motivating them to compete with friends or sporting icons or train under the guidance of a virtual coach. It can teleport people with disabilities to desired locations virtually and motivate them to work out better. A healthy insured is less likely to fall sick and probably has a longer life span, which translates to lesser claims and lower loss ratios for insurers.
Insurance for metaverse
While the metaverse can assist insurers to perform better, it can also serve as a growth market to generate revenue.
Insurers can sell new products in the virtual world and increase their market footprint. Let us look at a few examples:
Personal risks: To experience the virtual world, one usually wears a head-mounted device, along with a set of spatial sensors on the hands. As a result of users being fully engrossed in the metaverse, they often forget about the physical world and tend to hurt themselves and damage property. One large insurance firm revealed that claims on accidents from metaverse and VR devices spiked 31% in 2021. Insurers can explore options for charging higher premiums to cover the risks arising from the usage of head-mounted devices.
Risks to property or digital assets: The metaverse will open the door to new marketplaces and drive the evolution of digital economies. Consumers can purchase digital assets like branded merchandise for avatars, digital art, and real estate in the virtual world. As the value of the asset increases, consumers would lean toward insurance to protect their digital investments. This generates new business opportunities and at the same time, warrants the launch of new products for digital protection.
Cybersecurity and data privacy risks: Head-mounted devices exchange biometric data, including facial data and financial data like credit card information and account passwords through remote servers. Over time, the host builds a rich repository of various consumer habits, like shopping trends, places of interest, behavioral data, and personal information.
This is a treasure trove of information that attracts cybercriminals. As more and more people use such devices, it drastically expands the attack surface and exposes them to cyber-risks and increases the threat of an attack. Eventually, organizations will need cyber-protection and insurance to safeguard such information.
The next big thing for insurers is metaverse
The insurance industry has often been considered a slow adopter of emerging technologies.
Insurers can change this perception if they are early to embrace metaverse technologies and leverage it to enhance the experience of customers, agents, and employees. Given the abundance of opportunities across the insurance life cycle, insurers must identify the right use cases to create a differentiated experience for their stakeholders. Insurers must start experimenting and get their feet wet while the technology is still in its early stages of development. And that time is now.
