Facebook and Instagram's announcement to transfer to “Meta” in late 2021 was one of the biggest news in the tech world. People are buzzing about NFT's, Web3, Crypto, and other DeFi terms like the lightbulb was just invented. It's exciting and annoying at the same time.

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The specific features of Meta’s upgraded technology and their implementation into the life of tech-savvy users are yet to be revealed, and they promise a level of virtual reality that has been impossible to grasp in the previous years. By the looks of it, one day this virtual world may be the new normal.

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Today, the Metaverse is still a small and ambitious project that teases bigger changes in the tech industry, so we'll see how it actually shakes out. However, it’s time for insurance companies to prepare for the adaptation of their services to virtual conditions in order to stay relevant (and to be prepared for the profits).

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Over a trillion dollars are exchanged every year within the insurance industry and there's already a demand for new cyber products to protect things like digital real estate, currency, games, NFT's, and other virtual objects.

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Coverage providers are getting in the process of creating parallel systems that will be used for transferring their usual services to the conditions of virtual reality and worlds like the Metaverse. The aim of this article is to explore the concept of intellectual property in a digital setting and address the possible insurance solutions in the near future.

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What is the Metaverse?

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The word Metaverse literally means future (meta) universe (verse) and it was not created by Mark Zuckerberg. The brilliant novelist, Neal Stephenson's, coined the term in his 1992 science fiction novel Snow Crash.

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The possibilities offered by the metaverse promise a merge of our physical and digital worlds through several mediums - augmented reality (AR), virtual reality (VR), or on a simple screen. From shopping and entertainment to socialization and wealth, the overlap will include many aspects of our everyday lives.

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Even without VR goggles on, our physical and virtual reality have been intertwined for some time now. For example, the Netflix app’s algorithm can assess your watching history and base its suggestions on it. Similarly, the Uber app is able to inform you about the distance of the car according to your location data.

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For a long time, tech geeks have been trying to bring about an era when our physical life is largely reflected in virtual reality. In their vision for the virtual space, users spend a lot of time interacting with their families, friends, and colleagues, as well as spending money on objects for their avatars, such as outfits.

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The concept that Mark Zuckerberg and his fellow technology experts call ‘the metaverse’ is centered around creating a virtual platform for living a second life online. In order to immerse yourself in the virtual world, you need a headset that transfers you to a 3D environment (until Elon embeds it into your head). With additional motion-sensing controllers and a microphone, users have the option of interacting with virtual objects and getting in touch with others in the metaverse. 

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What is Digital Real Estate?

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In general, digital real estate refers to everything you can browse online related to real estate, so a more specific term would be virtual property. Every website with all its components, such as URL and domain name, pictures, and videos are digital assets. And, like every other kind of asset, they have a monetary value (www.business.com sold for $345 million, for example).

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Many users of social media apps purchase ads for their brand for a certain price, thus receiving passive income in a similar way to traditional landlords. One can argue that the two concepts are fundamentally different, but there is one crucial common thing that determines the advantage of physical and digital landowners - and that is ownership. 

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Digital property with monetary value can be personal or company-owned. Personal virtual assets include:

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• Blogs or websites that bring profit to the owner
• Photos, music, eBooks, intellectual property, and other digital property that creates revenue (such as NFT)
• Videos
• Domain names
• Personal accounts used to manage monetary resources in the form of money or credit cards such as bank accounts, loyalty rewards programs, PayPal cards, and any kind of accounts that include credit balances

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Digital business property includes:

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• Every online account registered to a company
• Any form of digital property owned by a business
• All digital assets of an online store belonging to the business or an Amazon, eBay, or Etsy store you use to sell things
• The complete archive of client information and customer history (such as email lists) as well as newsletter subscription 

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In its essence, a metaverse can include various types of digital assets, such as cryptocurrencies, in-game tools (like Minecraft Tools), in-game currencies (like V-Bucks in Fortnite), and many other virtual objects prone to risks in different realms of the metaverse.

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Just like things go in the traditional real estate field, virtual property can be bought and sold on the market. Social media giants such as Instagram, Twitter, Facebook, and YouTube will soon play a similar role in virtual reality as landlords in our physical environment.

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That’s right - like the physical world, virtual reality is full of threats, such as traffic accidents (with or without injuries), natural disasters (floods, earthquakes, fire), losses from lawsuits, illness, or death.  

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So, what exactly is the role of the coverage industry in virtual reality? Not all losses tackled by insurance policies are physical - with modern cyber policies, coverage providers also insure their customers in cases of reputational damage. Therefore, in the near future, solid premium insurance plans are supposed to include coverage for specific losses in the metaverse in their insurance policies.

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Why Invest In Digital Real Estate?

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The answer is quite simple - just like in our physical reality, owning virtual property in areas with a significant amount of virtual engagement can expose your business to millions of additional visitors.

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For example, if you plan to sell a product or service to a worldwide target audience, the metaverse will connect you to consumers that seek a more interactive way to get in touch with your brand. 

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The metaverse offers endless opportunities for consumers to communicate with businesses in a more engaging way, which makes it a preferable environment in the modern capitalist world. Big brands will have to adapt and invest in establishing their place in the metaverse instead of keeping the traditional 2D smartphone concept as the main platform for managing the business.

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How to Insure Digital Property?

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Property insurance in the metaverse is becoming a real opportunity - Bitcoin, personal photographs, art, movies, sport memorabilia and other digital assets are booming among most industries, and the innovation is proving to speed up. However, in its vast and fast-growing nature, the Metaverse requires much more change in order for digital property to be properly protected. 

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The Metaverse is still small, but it has the potential to become a huge thing soon. Virtual reality has the potential to bring a dramatic change in our every day lives. Therefore, coverage providers will be expected to offer digital property insurance policies that align with the Metaverse standards in the same way they cover all the fields in our physical environment.

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Insurance for Metaverse property should include not only personal property but also intellectual property. While this is quite a challenging prospect, it is estimated that insurance institutions will have to meet these expectations so as to avoid becoming antiquated.

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What insurance covers a digital asset?

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Cybersecurity insurance is crucial in every business that deals with online presence, but it’s especially important when it comes to the virtual reality environment. Phishing, malware, ransomware attacks, and other forms of cybercrime have the potential of putting consumers’ ownership of cryptocurrencies and other digital assets in danger.

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Digital property insurance is one of the solutions that can help consumers prevent and handle possible digital losses. The popularization of virtual reality could cause significant changes in operations in the insurance industry so that providers can offer workers’ compensation for businesses or access to vital documentation in the same place.

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Technological innovations, such as artificial intelligence, are expected to play a crucial role in this transformation of insurance policies too. However, for this concept to work, there needs to be a notion of collaboration between insurance companies, the government, and all other relevant participants. Additionally, the adaptation of digital property insurance also requires a shift in perspective, because the current business insurance competitors are still not enthusiastic enough to invest in the infrastructure of the Metaverse.

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Supported by peer-to-peer exchange systems and decentralized technologies, the Metaverse is bound to keep expanding even without the cooperation of traditional entities, so the outdated mindset in some insurance providers will probably have no actual impact on the growing influence of virtual reality. 

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So, insurance for digital property will definitely become a standard practice in the Metaverse - the only question is which insurance companies will become eligible to sell such coverage policies.

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Today, and it's nearly half-way through 2022, there are only a handful of insurance providers offering coverage for General Liability, Cyber Liability, and Management Liability insurance for businesses in the blockchain arena. They are probably not insurers you've heard of too (mostly, Lloyds of London syndicates.).

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The good news - there are insurers providing coverage. The better news - we foresee the list of insurers growing over the next couple years as more money finds its way into the industry.

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How Much Will it Cost?

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The idea of digital property insurance is still in its early stages of development, so there is no specific information about the monetary worth of coverage policies in the Metaverse.

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Experts have estimated that the complete industry of virtual reality insurance will take up a small portion of the current physical environment premium. In comparison to the 2020s net written premium of $650 billion, approximately $12 billion in net underwriting profit should be sufficient for insurance in the Metaverse.

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Generally speaking, a Cyber Liability & Data Breach policy for a blockchain, Web30.0, or crypto focused company are typically $2,500 to $5,000 a year for a new business. As more assets are managed and more customers use the platform, the premium increases.

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Speak with a blockchain advisor today about your business and learn more about coverage, pricing, and risk management practices to protect your operations.

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