It has become part of the folklore of modern societies that Gen Zs represent the next stage of evolution of the human race, and this could have a profound effect on the insurance industry.
These young people, aged anywhere between 27 and 12, were born between 1997 and 2012. In the US they are reported to spend over seven hours every day on their smartphones. By contrast, Gen Zs in Asia spend only six hours per day on their smartphones.
There is a growing body of thought that, since Gen Zs spend so much time online, they are developing a demand for validation that is also only available online.
Previous generations may have treated themselves to a luxury watch or bling earrings as a reward for achieving something special or commemorating a special occasion, but Gen Zs are likely to want that reward in digital form.
The thinking is that affluent Gen Zs are just as likely to want to buy a $15,000 pair of diamond Tiffany earrings that exist only online from a virtual store as they are to buy the real deal from a real store.
And so, we enter the world of insuring digital assets.
These digital assets might be virtual Tiffany earrings – or a non-fungible token (NFT) of a Banksy art piece – or simply plain old-fashioned Bitcoin. Boston Consulting Group forecasts that asset tokenisation will reach a value of $16tn by 2030.
Something like 10% of global GDP could be in digital assets in just six years, and the insurance industry in APAC is going to have to get ready to offer cover for this migration of stores of wealth to the digital domain.
Leading digital asset lawyers indicate that the sector is still very much in its development phase. Apart from anything else, there are jurisdictional questions in play.
If a customer in Singapore buys an NFT from a vendor in Hong Kong and then stores it in a digital wallet that is held on a server in a data centre in the USA, where ‘is’ the asset?
There will also be a range of issues concerning digital security and anti-hacking measures, some of which can be addressed by blockchain or other distributed ledger technologies. But it seems certain that the growth in asset tokenisation will lead to growth in cyber crime – and, presumably, a growth in demand for cyber cover.
The value of digital assets can range from very small to very large – ranging from a young boy buying a magic-spell-enhanced sword and shield in a virtual game to a leading institutional asset manager holding billions of dollars in cryptocurrencies. (The five largest regulated US digital asset managers hold over $46bn of crypto at present, we are told).
That’s quite a spread for quite a market.
We know that the insurance legal community it focused on this emerging area but not in a particularly high-profile manner. Some insurers are following suit. But it’s a big new market that is emerging and there is really not a lot of time to get ready.
Paul McNamara
Editorial director
Asia Insurance Review