This quote from the well-respected American writer and entrepreneur Stewart Brand was not intended to be aimed at insurance companies (or any particular industry for that matter). However, as we look at the insurance industry as a whole, the quote is poignant - reminding us that those who fail to adapt to changing circumstances will be left behind.
Today the insurance industry is at an important crossroads. Traditional or ‘legacy’ insurance companies have been slow-moving when it comes to adopting digital technologies, which has resulted in insurtech firms becoming more prevalent in the sector.
Legacy insurers were slow to go digital in the past. However, there is no reason why they should remain on the sidelines whilst emerging insurtech rivals explore the ways in which new technology could be used in their businesses.
New technology such as the blockchain-based Web3 (also known as Web 3.0) is one of much importance to the insurance industry. Web3 is a decentralized version of the current World Wide Web that we use today. The biggest product of Web3 is cryptocurrency.
For those who aren’t aware of what cryptocurrency (also known as crypto) is, the term refers to a collection of various, decentralized and global digital currencies that exist within the blockchain. While cryptocurrency is not considered legal tender in most countries yet, there are several different types of cryptocurrency in use including Ethereum, Solana and Avalanche. However, the oldest, and most popular form of cryptocurrency is Bitcoin. Interestingly, despite being tied with the emerging Web3 technology, the creation of Bitcoin actually dates back to 2009, which is fairly ancient when compared to most other crypto which launched from 2015 onwards.
Meanwhile, the other much-discussed new technology (which also forms part of the Web3 wave) is the metaverse. Championed by Facebook (now known as Meta), the metaverse refers to a network of virtual, interactive worlds.
Over the course of this article, we will highlight the ways in which insurers can embrace and use these new technologies throughout the various departments of their business.
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Admin and product development
In the past we often thought of digital as being temporary/transient due to its non physical nature. However, new technologies such as the metaverse and, in particular, Web3 and non-fungible tokens (NFT’s) have shown that the modern consumer places value on their digital assets and their security. As such, new technology has allowed insurers to develop new products that cater to those interested in insuring their digital assets.
One such firm that has embraced digital protection is AON: The legacy insurer offers digital asset and blockchain insurance solutions, including Crime and Specie Insurance for the theft of digital assets. Meanwhile, the corporate body, Lloyds of London recently partnered with CoinCover to protect cryptocurrency held in online wallets against theft or other malicious hacks.
Another company that has invested in cryptocurrency is specialist insurer Beazley. In 2022, the insurance firm launched their product ‘Cryptoguard’ which is designed to address the Directors and Officers liability risks faced by all types of companies operating in the crypto space. Beazley’s product gives customers access to an integrated team of underwriters and claims managers with a deep understanding of crypto, making it ideal for anyone from emerging startups to established public and private organizations.
Due to the traceable and non-editable nature of the data, blockchain technology can help to highlight and eliminate common sources of fraud in the insurance industry. Fraud costs more than $40 billion USD a year and is currently difficult to detect. However, as data within a blockchain is traceable, insurers will be able to see if a customer has made multiple claims from the same incident, even if the claim was made through different companies.
Blockchain has the potential to create significant products in the future and may even be an enabler in ways that we are unable to currently foresee. From a pure technical standpoint, it will be interesting to see how insurance companies can utilize the blockchain and NFT’s exist to further innovation within the insurance industry.
Distribution and marketing
Undoubtedly, one of the biggest and most obvious ways that new technology, and in particular, the metaverse, can be used by insurers is in the distribution and marketing silios of the business.
As seen in other industries, the metaverse provides a raft of advertising and marketing opportunities to businesses of all shapes and sizes. Larger insurance firms can embrace the metaverse by following the examples of Nike, DBS and even TIME Studios' collaboration with Epic Games, who have all previously created a number of unique virtual events within two of the most popular metaverses, Fortnite and Roblox.
The metaverse can also be used for distribution purposes as well, with insurers creating their own virtual meeting spaces and workshops aimed at targeting younger, more tech-savvy audiences. The South Korean firm Heungkuk Life Insurance recently opened a ‘virtual counseling window’ in the metaverse, allowing customers to visit the agency using a virtual reality headset. Meanwhile, AXA have also committed to the metaverse, stating that they intend to open a virtual agency within the metaverse which would be specifically tailored to providing new services for the virtual world.
Additionally, the metaverse can also be used to host personal one-to-one conversations with customers who prefer using a 3D virtual space instead of a telephone or video call.
Underwriting, payments and claims in the metaverse
Along with marketing, the biggest area that new technology will affect in insurance is within the realms of underwriting, payments and claims.
Cryptocurrency is one of the biggest tentpoles of Web3, and is a vital part of our theorized digital future. Following the coronavirus pandemic the popularity of crypto has skyrocketed, in response to the increasing popularity of crypto, AXA Switzerland have since enabled private customers to pay for select premiums with bitcoin.
In addition to paying for premiums, the blockchain technology that powers cryptocurrency can also be used for claims and underwriting.
The blockchain technology that powers crypto enables automated real-time data collection, which could dramatically speed up the claims process. For example, in 2022, Chinese financial services company Ant Group launched a blockchain-based digital operation platform for insurance companies in China.
Named ‘Xingyun’, the platform promises to help insurers improve operational efficiency and customer experience throughout every level of a business. According to the Ant Group, the AI-powered digital tool can identify 107 types of verification documents with an identification accuracy rate above 95%.
Meanwhile, the process of underwriting can also become much more transparent, quicker and efficient through the use of blockchain technology as well. The traceable data trail left by Blockchain can help to foster transparency, and has been the backbone in facilitating the landmark, three-way collaborative effort by IBM, AIG and Standard Chartered to create the world’s first multinational insurance policy.
As highlighted in our article on how insurers can become more digitally effective, there are essentially three factors that must be taken into consideration when assessing the impact that the metaverse, Web3 or any new technology will have on the Insurance industry, namely the ‘People’, ‘Processes’ and ‘Technology’.
People
In order for insurers to embrace the metaverse and other emerging technology in their business, they must first employ the right internal talent. Employing talent that has a high level of data literacy, as well as sufficient knowledge and understanding of emerging technologies, will significantly help an insurance company to overcome any skepticism and distrust that might exist about these new technologies within their business.
Processes
The way in which insurance is handled both from a customer and insurer perspective will undoubtedly be affected by the advent of new technology. For the insurer, the way in which customers’ claims are handled and communicated will fundamentally change. As highlighted above in our ‘underwriting, payments and claims' section, new technology will allow for faster filing and more automation in the processing of claims and underwriting.
Customers looking to purchase insurance are also now more likely to come through online channels as businesses diverse from the traditional face-to-face meetings of yesteryear. Payments for insurance claims are also expected to change. As highlighted earlier, AXA Switzerland has begun accepting bitcoin, and other insurance firms are sure to follow. It should also be noted that while cryptocurrency is currently unregulated, there movements by the US and other governments to put legislation and regulation in place
Technology
One of the hardest hurdles for insurance companies (and many other industries alike) to overcome in regards to Web3 and the metaverse, is the new and expensive technology that is required to use the platform as it was intended. While virtual reality headsets are proving popular, they are, by their niche nature, rather expensive products that could be cost-prohibitive to smaller insurers.
Thankfully, other emerging technologies such as blockchain don’t require the use of headsets to engage with. Therefore, they might be the more accessible new technology that insurers can embrace.
As emphasized throughout this article, there are several benefits for insurers who are willing to embrace the Metaverse, crypto, and other adjacent new technologies. With issues such as fraud costing the insurance sector more than $40 billion USD a year, there must be a concerted effort from all insurance firms to look at how to best utilize emerging technology throughout their organizations.
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Ameen HemaniSenior Consultant, Delivery and Strategy
Report
Innovation in Insurance Report
Our survey of 250 property and casualty policy holders aimed to cover not only what they expect from the claims process, but also key pain points, preferred communication channels and what they want insurers to do differently.