Quantum computing’s ability to accurately simulate risk scenarios, optimize portfolios and quickly sift through large unstructured datasets to train ML algorithms for fraud detection and enhanced customer targeting, can deliver significant benefits to the financial services industry.
Insurance companies in particular can benefit from the ability of quantum computers to accurately simulate weather systems, to better manage catastrophe and whether-related losses. The risk aggregation capabilities of quantum computers can also enhance the underwriting function of insurers.
Operational benefits to insurers
The ever increasing deployment of IoT (Internet of Things) devices and sensors in various environments, has led to a boom in the volume and veracity of data available to insurers. Quantum computing is well placed to process this large amount of data, which enables a much greater understanding of risk and offers opportunities for improved pricing and risk models within the underwriting process. There are also opportunities to collaborate with clients to share risk-relevant data for creating better products.
- The ability to accurately simulate weather systems delivers significant improvements to catastrophe modelling (used in property insurance), benefiting the process of pricing, reserving and setting policy limits. The modelling of other aggregate risks such as supply chain interruption, liability risks or cyber, could also benefit from quantum computing capabilities
- Improved customer relationship management (CRM). Quantum computing can more accurately target customers and predict their preferences based on customer behaviour data. This can enhance customer satisfaction and retention by targeting policyholders with more pre-emptive insurance products and service recommendations .
- Improved natural language processing (NLP) capabilities could lead to better fraud detection, market insights, trend analysis and predictive analytics models.
- Automation of the claims function in real-time using rapid data flow from smart devices, which reduces costs and drives efficiency Insurers who are proactive in investing in quantum solutions as they start to emerge, can gain a significant competitive edge based on the variety of operational benefits quantum computing offers to insurers.
- Additionally, the accessibility of QCaaS (quantum computing as a service) via the cloud is likely to produce “Killer Apps” for the insurance sector, which increases the opportunity costs associated with insurers not investing in quantum solutions.
Insurance lines of business affected
There are many insurance lines of business that will be impacted by the emergence of quantum computing. However, the largest potential impact arises from the cyber security risks posed by cryptographically relevant quantum computers. Cyber risks by their nature can have an influence on many lines of insurance business and practically all industries.
In a scenario where the cryptographic threat from quantum computing precedes the full adoption of PQC (post quantum cryptography) or other quantum-secure protocols, the world and the insurance industry face a systemic cyber risk that can affect everything from the security of our text messages to state guarded secrets and access to military codes.
Quantum computing also exacerbates the risk faced by artificial intelligence (AI) technology, since quantum computing will improve machine learning (ML) capabilities, leading to broader adoption of ML and AI solutions and products in all industries.