Suddenly the metaverse is everywhere. Ok, the concept of the metaverse is everywhere – thanks to
Meta/Facebook is not the first company to start talking about the Metaverse. There is
– and more broadly has described a vision of a “
There does not appear to be a common definition of the metaverse, but to this insurance analyst (firmly based in the physical universe), the key characteristics of current metaverse visions appear to include:
- There will be several metaverses (e.g. there could be one from Meta/Facebook, one from Fortnite . . . and a bunch more)
- In each metaverse, a resident/visitor can choose multiple environments, activities, and social groups: games, your town, any town, real or imagined locations (Hawaii or Planet 10), chats, concerts, sporting events, and . . .
- There is interoperability among the multiple metaverses. In other words, a visitor/resident of one metaverse, can take a good deal of his or her identity/identities, activities, relationships, assets etc. to other metaverses, and back again.
- Visitors/residents can have many avatars and identities -- some that look like them, and some that look like how they would like to look.
- Many types of devices can access the metaverses, including virtual reality, enhanced reality, mobile device, pc’s.
Will the metaverse(s) happen? I don’t know.
But let’s do a thought experiment for how insurance might work in the metaverse.
First, back to basics. In the simplest terms, what does the insurance industry do? In return for the payment of a premium, insurers indemnify policyholders when specified losses occur. Note that even today, not all losses are physical – think of reputational damage coverage under cyber policies.
By definition, a metaverse is virtual, not physical. All the same, there are many types of assets which could exist in a metaverse:
- Crypto currencies (of course).
- In-game currencies (e.g. V-Bucks in Fortnite).
- In-game tools (Minecraft Tools).
- AND any virtual object that could be destroyed or damaged according to the controlling logic (and events permitted by that logic) in any realm of any metaverse, such as:
- Automobiles
- Homes
- Businesses
- Health
- Lives
You get the picture.
In this thought experiment, if the metaverse succeeds; some visitors and residents will want to be in a metaverse that has possibilities of loss (as well as gain). Some of those visitors and residents will have a sense of ownership, pride, and responsibility for their virtual assets. Those people will want to mitigate those losses through metaverse insurance – and be willing to pay premiums that have value in the physical universe.
What proportion? It is an open question. My guess is that the total addressable market of metaverse insurance will be only a small portion of today’s physical world premium. Even so, a small fraction of the $650 billion net written premium and $12 billion in net underwriting profit in 2020 in the U.S., might be enough to make insuring the metaverse interesting.
