State Farm, insurtechs explore use cases for the metaverse
When insurtech startup Spokk launched in 2022, it didn’t just launch in the physical world, it also launched in the metaverse.
It let customers create avatars for pets covered by its pet insurance and found real business potential in insuring gaming avatars. More recently, Spokk partnered with Petaverse, a virtual pet park in the Decentraland virtual world, to offer discounts to users based on activity in the metaverse.
“Everything we’re doing in the metaverse is a first step to start insuring digital assets, not only for gaming, but also for NFTs, crypto, real estate, cars and so on,” said Alexandra Gladyshevskaya, co-founder and CEO of Spokk. “A lot of companies, especially corporates, would like to stay on the safe side, covering homeowners insurance, car insurance and life insurance, rather than interesting things where they can diversify their risks and their portfolio.”
While the metaverse has been a useful promotional and communication tool for startups like Spokk, established carriers are looking at the metaverse more carefully and cautiously. However, it can have its uses for the insurance industry – and as more than just a consumer portal, State Farm innovation executive Jim Ryan believes.
Jim Ryan, innovation executive, State Farm.
“A lot of people equate the metaverse with Facebook and some type of advanced interactive consumer experience,” he said. “There’s a lot of opportunities for immersive context, whether that’s in training, whether that’s in education. There’s a lot of things even within the company that you can do. A lot of things within working and having tighter engagement with your customers. That is a more B2B or B2B2C approach versus standing a kiosk in the metaverse that says, ‘Hey, now your State Farm agent is three dimensional.’ If that’s all you do, you really haven’t done much.”
Insurers can use the metaverse to foster new ways for employees, agents and consumers to interact, according to Ryan. They can also use the metaverse for its “digital twin” capabilities to simulate a property being covered, he said.
“If you could quickly do a survey that says okay, here’s everything in my house, you can quickly build the digital twin of a home. Now we can actually understand what’s going on in your home. We can understand if you make any changes to it,” Ryan said. “Then we can help you understand what the context of that is – does that reduce or improve or increase your insurance risk, reduce or increase your maintenance risks? We can use that as a means to actually fundamentally improve the relationship with that policy.”
Digital twinning using the metaverse or virtual reality can be useful for underwriting, according to Galen Shaffer, vice president at Eos Venture Partners, a specialist venture capital firm that invests in early-stage insurtech companies.
Galen Shaffer, vice president, Eos Venture Partners.
“That’s a hyper-specialized, industry-specific model where you create a virtual version of a large scale asset,” she said. “You put that asset through certain stress test scenarios – an earthquake, a hurricane – and see how the digital twin responds. That has been incredibly helpful in underwriting, but not many insurtechs are operating in that space, because those are some big risks that require significant compute power. It’s challenging for a carrier to trust an early-stage company with their core risk model for a large asset.”
Digital twinning is a practical use case for insurers in the metaverse, because it tethers a virtual metaverse function to real world objects, according to Donald Light, director of the property and casualty insurance practice for Celent in North America. Other real world insurance applications of the metaverse include loss control, especially for workers compensation coverage.
Donald Light, director of the property and casualty insurance practice for Celent in North America.
Darren Filkins
“Augmented reality and virtual reality have been talked about in insurance for some time,” he said. “Also in physical environments where slips and falls, or, much worse, equipment malfunctions can injure people, virtual reality can be used to train workers on how to repair complicated machinery so it doesn’t malfunction and injure people.”
Through metaverse simulations of properties and workplace activities, carriers could reduce risks, as Light stated. For auto, life and health insurance, the metaverse could also provide ways to reduce risks, he said.
“On the personal lines side, it probably overlaps with gamification, which has been around probably 10-plus years,” Light said. “But if you want to influence people to be safer drivers or on the life side or health side, to live a healthier life and exercise, that could be a plus.”
Some aspects of the so-called metaverse are not suitable for insurance companies. For instance, underwriting coverage for virtual assets such as NFTs or virtual avatars may be too risky and untethered from the real world, according to Light.
However, there is much the industry can learn from exploring the possibilities of the metaverse, State Farm’s Ryan said.
“There’s a ton that’s happening, not only just improvements from an engineering perspective, and ergonomics perspective, but information and insight around how stuff actually works, what makes stuff work well, and what increases the danger of things,” he said. “There’s a world of opportunity in continuing to advance our knowledge of self [understanding what our insurance risks are] and knowledge of the environment based upon being able to work with it, and being able to experiment with it in ways that you could not otherwise.”
The bottom line, as Shaffer sees it, is that for the insurance industry, the metaverse is already here, like it or not. “The metaverse is just digital communities built around digital content,” she said. “There isn’t going to be one moment where we go digital. We are always in a process of living an increasingly digitized life.”
