Quantum Computing: An Insurance Primer
Quantum Computing: An Insurance Primer
Quantum computing will present the insurance carrier with an unprecedented opportunity to transform their business, while simultaneously becoming a potentially huge liability. The ability to process huge datasets and build models that would have previously taken months or years and now could take minutes, days or weeks is alluring. Quantum computing will provide this and more.
Quantum Computing applies Quantum Theory and Quantum Mechanics to create next generation computers that are hundreds of millions of times more powerful than today’s computers which are based on traditional silicon chip technologies. Quantum computers can process massive and complex datasets more efficiently than classical computers. They excel as solving optimization problems. This will allow a carrier to improve and expand on predictive and risk modeling.
The power of Quantum computers is measured in something called a qBit. There are two companies leading the charge. DWave and Rigetti. Both companies are offering a cloud based system so people can harness the power of quantum computers to start to develop and test applications and models.
Why should a Carrier care?
Quantum computers will simultaneously bring insurers and their client’s great benefits, but also great threats.
The Bulls
Quantum computing will allow the carrier to process vastly more amounts of information than they do today. The application is both on the insurance and investment side of the business. Quantum computing will ultimately allow the carrier to improve risk models, and potentially do this even in real time. For example, the carrier could
- instantly model the impact of an approaching hurricane,
- detect and counter cyber threats in real time for their clients,
- use IoT and telematics data to proactively price or warn clients of potential issues,
- help workers comp carriers get employees back to work quicker by quickly identifying treatment options
- pre-price risks,
- detect and mitigate fraud,
- develop new products quickly and based on simulating data, or
- model life expectancy for large populations,
and everything in between. The only limiting factor will be the amount of data you have. On their portfolio management and investment side, the carrier will see similar gains in modeling out investment gains, portfolio optimization, and options.
The Bears
Simply put, Quantum computers will allow cyber-attacks of unprecedented depth and frequency. Today’s encryption standards will be meaningless. A Cybercriminal will be able to breach passwords and security as we know it now in milliseconds. The risks will be not only to the insured, but also to you as the carrier. Examples include:
- No data security. This impacts both clients and the carrier alike. The carrier’s systems are at risk and claims from clients will increase in frequency and severity as they get hacked more frequently and with greater impact
- Competitors could develop and deploy new products or price products more accurately using quantum computing
The Path Forward
As with all new technologies, Carriers should be aware of Quantum computing and begin to track advances in the field. Being informed about the benefits and the pitfalls of any new technology is the first step in creating a well thought through strategy. More forward-thinking carriers should engage millennial employees who are attracted to new technology. They could allow these employees to explore the technology thru the new cloud-based quantum computing options.
Carriers should look at Quantum computing thru five lenses:
- How can they create new value
- How this might destroy old paradigms and models
- How can it help them improve operational efficiency
- How can it help improve risk modeling
- How can it help improve customer experiences and expectations
Evaluating the upside and downside of new technology should be done in days and weeks not months and years.
Insurtech Advisors is dedicated to helping regional insurance carriers plan for the future today. We help the Carrier identify and partner with Insurtechs. This enables the Carrier to thrive and continue to meet the needs of their members, employees, and independent agents.