If the technology pundits have it right, by the end of the decade, we will all be (virtually) strolling through a Main Street populated by luxury brands, adventure experiences, and companies of all sort — all from the comfort of our living rooms via our virtual reality head sets.
This vision of a life lived vicariously through a computerized experience has been lumped into the concept of the “metaverse.”
While the metaverse concept seems far-fetched today, take a few minutes and go read articles published in the mid ‘90s about that newfangled World Wide Web, and how it would most likely never take off.
At this point, though, fewer than 20% of Americans have used virtual reality technology, but it is projected to grow by double digit percentages each year for the foreseeable future.
So, to hedge their bets, many major companies are spending millions of real world dollars buying up the prime real estate in these virtual environments, fully realizing that many of the virtual worlds aren’t going to last for the long-haul.
Still, where there is money changing hands, there is a need for insurance. For this report, we will look at a handful of scenarios where personal and business insurance may come into play in the metaverse, fully recognizing that most policies being written today don’t say a word about the virtual space.
The first way to think about metaverse insurance would be to imagine that stroll down the virtual Main Street.
Some insurance lines are irrelevant in the virtual space. Take health and life insurance, as two examples. If you die, you die, and if you get sick, you get sick, regardless of what space you are in, so there would be no policy difference.
But where it would make a difference is in the definition of “property.” Most standard homeowner’s policies cover damage to “tangible” property – meaning that anything in a virtual world would likely be excluded, unless the policy had a specific rider addressing it. So, that $100 spent to upgrade an avatar may be uninsured for now.
The definition of “property” is the real issue people are likely going to run into when it comes to extending physical-world insurance policies into the metaverse. Most of these policies do not specifically name the metaverse or virtual worlds in their typical policy language, and so each claim will likely be dealt with on a case-by-case basis.
Personal lines of insurance protect people from more than just physical losses, though.
Homeowner’s insurance covers things like defamation, as well. So, say a virtual customer left a libelous review on a metaverse-based skydiving company, the homeowner’s policy would protect them against the suit.
The interesting question is going to be what would happen if a virtual customer inadvertently damages a meta property — say they had malware on their computer, and by logging in they inadvertently introduced it to the server. The question of liability is one that has not been worked out yet.
At least one major insurer — State Farm — is taking a forward-leaning stance, by offering personal cyber/ransomware coverage as part of their identity restoration insurance policy. That policy steps in in case the policyholder suffers from a cyber attack, cyber extortion, identity theft, or online fraud.
Polices like this one would be the natural place for metaverse insurance to grow from.
With businesses clamoring to, or at least exploring the option of opening up a metaverse presence, they will be investing time, and money, on virtual assets that will need to be protected.
Business-based metaverse risks run the spectrum from hacking to business interruption, privacy breech and ransomware risks.
Like personal lines, business lines largely omit references to the metaverse (for now), but many include language saying they protect from “all risk” or are “comprehensive” policies, which could easily be understood to include the metaverse.
One policy clause business would do well to ask about is “coverage territory.” Most policies specifically include the United States, Puerto Rico, and Canada, but that doesn’t address how they would handle a server based in China or Europe.
When it comes to liability, personal injury may be an interesting area to watch.
Most people would have a hard time claiming a purely mental injury — like stress, or anxiety — but there might be some real liability if a metaverse business adopted technology that bled into real-world injury. Say a jump scare caused a person to fall out of their chair. Or a falling simulation caused the person to actually fall and hurt themselves. Or it a rapid VR movement caused the person to fall over a coffee table.
The internet is full of virtual reality fails, and when it is a business that might have prompted them to act, they may have a lawsuit against the business. Ensuring that the personal injury portion of a business owners policy would apply in a virtual space could go a long way toward heading off a disastrous suit later.
Metaverse companies that do business and process transactions in that space also need to ensure they are protected from potential data breeches. They also need to ensure those transactions are done securely, within relevant compliance regulations, and the currency is protected — whether it is real-world currency, crypto currency, or even in-game currency.
If there is a digital storefront, it could be just as susceptible to vandalism as a real-world storefront if a hacker were to deface it, and in many policies, “electronic data” is specifically excluded as tangible property, so filing a claim to restore that storefront may not be an option without specific policy language.
Then there is the question of if a ransomware attack left the storefront unusable, or if the metaverse platform were to crash altogether. Not being able to access a virtual property is going to stretch the concept of loss of use — which in the physical world requires damage to physical premises.
And if a cyber squatter takes over a corporate likeness, or otherwise infringes on a company’s intellectual property, having intellectual property insurance may save a few headaches, as well.
For their parts, errors and omissions policies and employer practices policies should still apply, even in the metaverse, because those polices are typically not location dependent.
What’s Next for Meta
Most of these metaverse conversations are hypothetical for now. Most policies just don’t address these risks, and in many cases, the risks are still theoretical.
At the top of the list of questions to be sorted out is who owns what risk? How much risk would the metaverse platform own if it were taken over by hackers? How much risk would a business own if there was damage to a virtual storefront?
But in the near future, policies from homeowner’s to business owner’s to business liability need to begin to address virtual spaces.
More companies surely will begin offering specialized policies in the not-too-distant future. And just like crypto currency and nonfungible tokens, there will be a few specialized lines capitalizing on the lack of policies to insure the first movers before metaverse policies go completely mainstream.
For now, companies seem to be more focused on locking down real estate in case the metaverse does eventually boom the way dot coms boomed in the late ‘90s.
Until there are virtual customers strolling down a metaverse Main Street, some early adapting companies may be dabbling their feet in the space for some experimental uses, like a training environment, a meeting environment, or even an environment for sales meetings.
But, as more and more money is being invested in the metaverse, demand for insurance products geared for that space is sure to grow in the very near future.
Michael Giusti is senior writer and analyst for InsuranceQuotes.com