The metaverse, once perfected, will be a dreamworld of opportunity, we’re told. But just as IRL there’ll be plenty of ‘bad actors’ to deal with along the way. And given the complexities of (and inabilities to) define identity, perhaps even more so. And, just as in real life, when such awful, potentially life-ruining crime represents a nightmare for one, so it becomes a huge business opportunity for others.
From digital art, replicas of luxury handbags, to real estate and other valuables yet to be invented, all these can be purchased in the metaverse. And as the volume of users and valuables begin to pick up, it’s safe to say that a similar number of scams will find their way into the space. And with metaverse consumer confidence only just beginning to find its feet, what can be done to ensure that the mainstream masses don’t run scared?
What you need is metaverse insurance
In 2021, metaverse companies faced up to 80% more bot attacks and 40% more human attacks than any other business with the only existing accountability over digital artefacts being the potential to verify ownership and transaction history via a blockchain element.
With the start of 2021 amounting to $4 billion worth of global NFT sales, it’s no wonder that scammers and fraudsters alike are taking advantage of what they see as a colossal opportunity.
The answer is of course ‘insurance’! The question is how should these assets be classified and valuated to make that possible in the metaverse?
Considering the redefined shared ownership of rights model for digital assets, and how nearly impossible it’ll be for an insurance company to locate or investigate a loss due to the metaverse’s decentralised nature, the possibility of accurately implementing ‘insurance’ in a virtual space becomes highly complicated.
How will insurance work in the metaverse?
It’s suggested that the most convenient model for insurance in the metaverse would imitate closely that of leased cars, where insurance is mandated by insurance companies to be purchased by both the owner/creator as well as the operator.
It works like this. In the case of a digital handbag, the onus would lie on both the creator – let’s say Prada – and the individual purchasing the rights to a piece of the handbag as an “intellectual property on loan” to purchase insurance. Such a system would lead to an insurance marketplace very similar to how individuals are currently obliged offline to insure rental and leased cars, despite still belonging to the owner of the car and not its borrower.
And if we’re considering risk assessment of assets in the metaverse, due to the inexactness of the current insurable environment and the near impossibility of investigating the loss, insurance premiums will most likely be high. But in much the same way as Tesla’s insurance, these figure could decrease over time.
How to insure yourself in the metaverse
There are two ways insurance can be obtained in the metaverse: either by insuring an asset permanently, like a homeowner or car insurance, or by opting for usage-based insurance, such as travel insurance. The former is only possible for creators of digital assets so long as its ownership is verifiable via blockchain. Similar to the art industry, the insurable value of a created digital asset in the metaverse would be determined by its previous transactional value. Once again, permanently insuring an asset to a user is possible, as long as it can be verified via the blockchain.
It seems that – despite the inherent complexities and new ways of looking at things required – anything is possible.
The metaverse continues to be the biggest thing in tech today and more behemoth companies, as well as investors, continue to watch its progress closely while betting huge sums on it at the same time.
Rest easy that insurers will be stepping up their game so as not to miss out the cash.
Isa Muhammad is a writer and video game journalist covering many aspects of entertainment media including the film industry. He's steadily writing his way to the sharp end of journalism and enjoys staying informed. If he's not reading, playing video games or catching up on his favourite TV series, then he's probably writing about them.
