Virtual Reality and Augmented Reality: The Next Best Thing to Being There

May 25, 2016 by Tushar P. Nandwana

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.

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:

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

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:

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 www.onebeacontech.com/.