Niraz Buhari | Web 3.0 is the term used to describe the next generation of the Internet

After a member firm bungled a bullying and harassment complaint and organised an inappropriate "guys' night out" event for staff, Lloyd's of London has issued the biggest penalty in its 336-year history.

Presently, it's difficult to discuss the future of financial services without also discussing the next phase of the World Wide Web �" from Web 3.0's decentralised internet to the Metaverse's increasingly blended physical-digital reality. In both cases, technological advancements are enabling a more seamless integration of our virtual and physical worlds, which has the potential to transform everything from how we work to how we transact. Therefore, what might these types of changes imply for the insurance industry?

Web 3.0 is the term used to describe the next generation of the Internet, which many predict will be a connected, data-driven, decentralised smart web. If Web 2.0 was defined by the rise and dominance of cloud-based technology, mobile, and social platforms, Web 3.0 will be defined by AI, machine learning, and high-performance computing.

Web 3.0 is being built on technology ecosystems (such as Blockchain, cryptocurrencies, NFTs, and DeFi) that are all geared toward an open, decentralised, and permissionless Internet. This largely eliminates the need for third-party oversight, granting users greater control over any content or assets they create.

As a result, a Web 3.0 future will generate novel types of transactions and modes of ownership, necessitating the development of transparent insurance products and services (such as smart contracts), as well as policies and regulations that take into account the vastly different landscape of decentralised finance. Collaborations and partnerships between traditional institutions and FinTech companies are likely to play a role in the transition to Web 3.0, as pairing institutional knowledge and resources with formidable technology and computing capabilities benefits everyone.

The Metaverse concept is predicated on the notion that in the future, our physical reality will be mirrored and enhanced digitally in an online realm. The Metaverse is less concerned with ownership than Web 3.0 is, and more concerned with the ways in which new interface technologies are likely to alter the human experience �" specifically, the ways in which we integrate our physical reality with digital and virtual spaces.

However, the Metaverse, like Web 3.0, is likely to rely on decentralisation technologies, specifically those that enable individuals to freely move or trade their assets. Cryptocurrencies, NFTs (non-fungible tokens stored on a blockchain), and other virtual objects are all examples of metaverse assets. It is not implausible to believe that some insurers will develop cyber policies to cover specified, non-physical losses within these categories, as well as hackings, data theft, and network outages.

The metaverse has the potential to significantly improve the appeal of insurance products. The YuLife app, for example, is designed in the style of a game and is centred on the 'Yuniverse,' a virtual world in which users can 'level up' by completing quests, duels, and challenges to gain access to new zones and increase their YuCoin balance.

In this way, the concept of a virtual world in which each user has an avatar and competes with friends and colleagues helps to make YuLife's product appealing, particularly to younger users and millennials. At the same time, keep in mind that this success is dependent on the interconnectedness of the digital and physical worlds. To be relevant, using the metaverse to inspire positive behavioural change must have some impact on people's real-life wellbeing.

Niraz Buhari, Founder and director, Smart Cover Insurance, City & Commercial Insurance Company