Virtual reality (VR) and augmented reality (AR) are gaining steam as companies design and develop products to engage us both in the workplace and as a leisure activity. Largely driven by advances in technology—such as increased hardware processing power, better software algorithms, and displays that are sharper, lighter and more power efficient—the most significant change is more affordable technology. Facebook’s Mark Zuckerberg stated that VR is “the next major computing and communication platform.” According to a Digi-Capital report, VR and AR combined will generate $150 billion in revenue by 2020—80 percent from the sale of AR devices and services and 20 percent from VR hardware devices and gaming. (Source: “Augmented/Virtual Reality to hit $150 billion, disrupting mobile by 2020,” Digi-Capital, April 2015)

Executive Summary

Physical responses ranging from motion sickness to loss of awareness are among the downsides of the virtual reality world, but VR and AR platforms create a host of benefits too—in medicine, military, education and commercial setting to name a few. Here, OneBeacon Technology’s Risk Control Technology Manager presents growth projections for VR, AR and related core element suppliers opening up risks and opportunities for P/C insurers.

So, what are VR and AR anyway?

Both consist of sophisticated software and hardware, with AR additionally including processors, sensors and high-resolution displays or micro-projectors to generate a realistic simulation experience.

  • VR—A closed and fully immersive system that puts the user inside of the virtual world through a head-mounted display or inside a large simulator. “Closed” means that the user is confined to operate and play within the virtual environment.
  • AR—An open and partly immersive environment that places virtual things into the user’s real world. It is “open” because the user is no longer confined within the virtual environment. Through the use of sophisticated tracking systems, accelerometers, gyroscopes and software, 3-D holograms are embedded onto the user’s physical world. Virtual objects are superimposed onto real-world objects, allowing users to physically maneuver around their real environment while simultaneously interacting with the virtual world. AR can be viewed as the evolution of VR.

CCS Insights projects that the growth in VR and AR devices will increase from 2.5 million in 2015 to 24 million in 2018. (Source: “Augmented and Virtual Reality Devices to Become a $4 Billion-Plus Business in Three Years”) This translates to growth in the supply of core elements needed to enable the VR/AR environment: newer software applications and hardware such as specialized chips, displays, sensors, components and small form factor power systems. New and existing firms with expertise in hardware, software, peripheral products and services are making their mark in this potentially lucrative field.

Some of these pioneering firms and their products include:

  • Google Cardboard—Consumers assemble a cardboard headset with a lens and use their smartphone as the screen. Cardboard is a $15 entry-level VR product being used in schools as a teaching aide. (See, for example, describing Google’s Expeditions Pioneer Program.)
  • Facebook Oculus—They released a VR headset called Rift this March for $599.
  • HTC Valve—Smartphone maker HTC and video game company Valve released a VR headset (Vive) this April for $799.
  • Samsung Gear VR—Available since late 2015, this is a simplified, $100 version of the Oculus headset used with various new Samsung smartphones that projects the VR environment.
  • Sony PlayStation VR—A VR system for its PlayStation platform and planned for release in the first half of 2016.
  • Magic Leap—Google invested in Magic Leap for a highly sophisticated AR product that uses a technology called “dynamic digitized light field signal.” It simulates an AR world superimposed onto the real world through the potential use of retinal projection. Rather than projecting an image onto a screen, micro-projectors project directly onto the user’s eyes. It has a wider viewing angle that better integrates the virtual and physical worlds. This untethered product should be released in a few years. (See, for example, “Google Invests Heavily in Magic Leap’s Effort to Blend Illusion and Reality, The New York Times Deal Book, Oct. 21, 2014.)
  • Microsoft HoloLens—This is an untethered AR headset with sensors for eye, head and position tracking, built-in camera and speaker system, and a lens projection system. Developer kits were released in March 2016 for $3,000, with a consumer product several years away.
  • Others—There are other VR headset manufacturers with product launches anticipated in 2016 such as FOVE VR, Zeiss VR One, Avegant Glyph, Razer OSVR, Freefly VR and other lesser-known brands.

The appeal of these platforms is their potential integration into routine tasks such as communicating, simulated training, gaming and more.

  • Gaming—This major growth targets thrill-seeking audiences by taking 2-D games to the next level by immersing the gamer into VR/AR games.
  • Military—HUD (heads-up display) and HMD (head-mounted displays) are VR/AR technologies that have been used for years. This allows pilots to see data directly on their windshield and is often used to create training simulations.
  • Commercial—AR systems are appearing in retail outlets such as Lego stores. A child can hold a Lego box near a store display equipped with an integrated camera and visualize a 3-D model of the finished toy.
  • Medical—Another simulation opportunity, enabling surgeons to train on models of the human body. Going forward, such systems can be coupled with other imaging systems (MRI, CAT) so a neurosurgeon can visualize a virtual 3-D image of a patient’s brain overlaid onto the patient’s actual anatomy, allowing doctors to perform surgeries that are currently impossible.
  • Navigation—While driving, a VR/AR system can overlay GPS directions and maps directly onto the user’s windshield, keeping the driver’s eyes on the road.
  • Tourism—VR/AR systems can enhance a person’s sightseeing experience. Imagine wearing AR-enabled glasses and walking through the Colosseum in Rome—not only seeing the sights but also learning about the specific areas being viewed.
  • Education/Training—AR systems can add digital content to printed materials, enabling students to become more engaged and take virtual journeys to remote parts of the world without leaving the classroom.

Risky Considerations

There are a variety of technological and human-experience issues that may limit the mass appeal and performance of VR/AR systems. Before they can become mainstream, VR/AR developers need to resolve these issues, including:

  • Tethered—Since VR/AR systems require significant computing power, they tend to be tethered or physically connected to computing hardware, which limits mobility and use. Higher processing requirements means more power.
  • Weight—A heavy headset may become uncomfortable after prolonged use.
  • FoV (Field of View)—The typical human eye has a 180 degree FoV. However, most VR headsets have FoV from 90 to 110 degrees, so the user is able to see beyond the FoV by simply moving their eyes. This makes the VR world less immersive and may cause eye strain, headaches and nausea. (For comparison of FoVs, see “Comparison Chart of FOV (Field of View) of VR Headsets,” VRTimes, May 24,2015.)
  • Motion Sickness—This can occur while using VR headsets because the user is stationary while the visual field is in motion. The brain sees the movement but can’t sync this to actual movement as registered by the inner ear. Prolonged use can make these ailments worse, limiting the time a user stays in a VR environment. Since AR systems incorporate both the physical and virtual worlds, they are likely to be less prone to these problems.
  • Cyber Sickness/Sim Sickness—For some, extended use of VR may cause seizures, double vision, altered vision, loss of awareness, eye strain, eye twitching, dizziness, light headedness, fatigue and other symptoms. (For more information on cyber and simulation sickness, see “Virtual Reality Affects Brain’s ‘GPS Cells,'” Live Science, Dec. 5, 2014.)

VR/AR presents the opportunity for numerous benefits ranging from recreational to commercial to medical uses. But as with any emerging technology, there are hazards—both known and unknown—that their manufacturers need to recognize and address as they design products.

Today, there is more excitement about VR/AR technology due to major releases from major players. Regardless, the question remains: Will it live up to the hype? Notably, many wonder whether applications and uses for these products will expand outside of niche areas and whether the price and ease of use will engage the average consumer. It appears that we are moving in that direction. And as we do, the insurance industry needs to be cognizant of the risks and opportunities this represents.

This article is based on a OneBeacon Technology Insurance white paper, “Virtual and Augmented Reality: The Next Major Computing and Communication Platform,” (March 17, 2016). For more information, visit the News and Insights section of