How will the third iteration of the web and the virtually augmented digital space known as the Metaverse impact the future of insurance?
Today, it’s hard to talk about the future of financial services without also talking about the next phase of the World Wide Web – from the decentralized internet known as Web 3.0 to the increasingly blended physical-digital reality of the Metaverse. In both cases, technological advancements are allowing our virtual and physical worlds to more seamlessly combine, promising to change everything from how we work to how we transact. So what might these kinds of changes reasonably mean for the insurance industry?
Web 3.0 is the term being used to define what many are predicting will be the next generation of the Internet – a connected, data-driven, decentralized smart web. If Web 2.0 was characterized by the emergence and dominance of cloud-based tech, mobile and social platforms, Web 3.0 will be all about AI, ML and high speed computing.
The technology ecosystems that Web 3.0 is being built on (like Blockchain, cryptocurrencies, NFTs and DeFi) are all geared toward an open, decentralized and permissionless Internet. This largely removes the need for oversight from trusted third parties, giving users more control over any content or assets they create.
A Web 3.0 future, therefore, will create new types of transactions and novel modes of ownership, necessitating a need for transparent insurance products and services (like smart contracts) and also for policies and regulations that consider the vastly different landscape of decentralized finance. Collaborations and partnerships between traditional institutions and FinTech companies will likely feature in the ramp up to Web 3.0, as pairing institutional knowledge and coffers with formidable tech and computing capabilities offers clear benefits to all parties.
The concept of the Metaverse hinges on the idea that in the future our real-time, physical reality will be digitally mirrored and augmented by technology in an online realm. The Metaverse tends to be less about questions of ownership than Web 3.0, and more about how new interfacing technologies are likely to change the human experience – specifically in the ways we merge our physical reality with digital and virtual spaces.
However, like Web 3.0, the Metaverse is also likely to rely on decentralization technologies, specifically those that allow individuals to move or trade their assets freely. Metaverse assets could range from cryptocurrencies to NFTs (non-fungible tokens stored on a blockchain) to other virtual objects. It’s not unreasonable to think that some insurers will be creating cyber policies to cover specified, non-physical losses within these categories, while also covering things like hackings, data theft and network outages.
From distributed ledger technology to real-time data collection and claims automation, DeFi-enabled insurance and cryptocurrencies are already reshaping how insurers think about traditional financial products and services. Especially in the way they use decentralized solutions to create more transparency and connectivity in digital spaces, the Metaverse and Web 3.0 will continue to use blockchain technologies in ways previously unimagined. For insurers, that means a strong commitment to innovation and tech adoption will be crucial when it comes to reaping the rewards of our real and virtual future.