In 2023, the metaverse is so much more than digital meeting spaces and games. It provides the potential for businesses to transform the experience of employees and customers, improve processes, and market new products and services. In fact, in a survey by global consultant Protiviti, more than 85% of North American business executives say the metaverse will be “somewhat” or “extremely important” to their business' future success.1
As the metaverse unlocks future business potential, it also carries some emerging risks for consumers and businesses, creating a growing need for insurance coverage.
“The transition to the metaverse – which is still in its infancy – will be gradual. However, businesses have already begun assessing the application of technologies like AR [augmented reality] and XR [extended reality] today,” said Michael Kearney, vice president of emerging technologies and innovation at The Hartford.
One example is what’s known as digital twins. These are virtual representations of physical objects, systems or processes. Digital twins can be effective for insurers to use in order to run cost-effective simulations, collect data to drive automation and increase efficiency with decision-making.
“It's important for companies to begin to experiment with these technologies in small, incremental steps over time,” explains Kearney. As technology evolves, it is critical that companies don’t fall behind their competitors in the digital space. Companies can experiment with what works best for them, as not all technologies will be necessary for their business.
One area businesses may be interested in testing: employee training. Another common use case for these virtual technologies is employee training. For example, augmented reality glasses – which provide a virtual overlay on top of a physical device with step-by-step instructions – can reduce training time, costs and risks while increasing employee engagement and safety awareness.
Emerging Metaverse Risks
As virtual real estate, digital assets and personal avatars expand, new risks are emerging for businesses, technology developers and insurers. Risks to consider include liability, data security and privacy issues. In the Protiviti survey, 42% of business executives polled said privacy and security risks were the primary roadblocks to implementing their metaverse strategy.2
“It's important for businesses to think through the return on investment they expect from technology and to understand the risks,” explained Andrew Zarkowsky, technology industry practice leader at The Hartford.
Top risks include:
Phishing and Scams
As consumers and businesses navigate the growing world of virtual avatars, new types of scams – including 3D social engineering and phishing – have emerged.
“One of the biggest early challenges is identifying people in the metaverse,” said Zarkowsky. “With AI technology, it's easier to mimic how people write or speak.” For instance, some scammers have created 3D avatars to impersonate co-workers or clients. This is done to get targets to share sensitive information and access.
Digital Asset Ownership
Digital asset ownership, like property or brands, presents another risk factor for businesses and insurers to address.
“Typically, a business might have general liability insurance for property damage, a policy for bodily injury to third parties, property coverage for physical damage to owned property and additional cyber insurance for data network infrastructure liability. In the metaverse, those needs are merging, presenting new challenges for the insurance industry,” Zarkowsky said. He noted that digital assets, like intellectual property and brands, can be vandalized, hacked, defrauded, or stolen in the metaverse.
Revenue streams augmented by AI can also be disrupted by loss of data or connectivity. This in turn creates a business continuity risk. “It is important to monitor digital risk as the adoption rate of these technologies increases. We might see increased outages, computer glitches, and technology security,” says Kearney.
Considering Risks and Moving Forward
Zarkowsky believes it's not just businesses and consumers that should consider the risks of the metaverse. Software companies and start-ups developing these technologies should also be aware of the risks. Failure for technology to deliver on a client's expectations can create a professional liability risk.
“It's important for the companies selling the products and the businesses buying the products to understand what the technology is going to deliver and the return on investment,” Zarkowsky said.
Despite its challenges, Zarkowsky remains optimistic about the metaverse's future. Its ability to aide research and development testing on large scale projects – like a power plant safety scenario – are easier, safer, and less expensive in a virtual environment than live.
1,2 “Protiviti-Oxford Survey: Global Leaders Place Bets on the Metaverse, North America Goes All In,” Protiviti, May 2023
La información proporcionada en estos materiales brinda información general y de asesoría. It shall not be considered legal advice. The Hartford does not warrant that the implementation of any view or recommendation contained herein will: (i) result in the elimination of any unsafe conditions at your business locations or with respect to your business operations; or (ii) be an appropriate legal or business practice. The Hartford assumes no responsibility for the control or correction of hazards or legal compliance with respect to your business practices, and the views and recommendations contained herein shall not constitute our undertaking, on your behalf or for the benefit of others, to determine or warrant that your business premises, locations or operations are safe or healthful, or are in compliance with any law, rule or regulation. Readers seeking to resolve specific safety, legal or business issues or concerns related to the information provided in these materials should consult their safety consultant, attorney or business advisors. All information and representations herein are as of June 2023.