How quantum computing could impact risk management and claims

Quantum computing’s impact on P&C insurance operations will be wide-ranging, say several sources who spoke with CU.

Almost every sector and department of the industry could be affected, including actuarial, risk management and underwriting teams, data analytics, IT, claims processing, investments, asset management, and fraud detection.

In short, quantum computing will provide more accurate models, faster processing capabilities, and tailored policy options, among other benefits.

Now is the time to plan for quantum and think about both the opportunities and risks, says Feite Kraay, alliance director for IBM, Kyndryl and ServiceNow with KPMG in Canada. “It’s not science fiction. It is real. Quantum utility is here now, and large-scale quantum advantage is coming.”

Benefitting data processing

Risk experts are touting quantum computing as a ‘game-changer,’ because of its ability to crunch numbers and solve math and data analysis problems at a rate never seen before.

For the insurance industry, quantum computing could revolutionize data processing and risk assessment because the AI can significantly enhance the speed and accuracy of risk modelling, says Biren Agnihotri, leader of emerging technologies and AI & data with EY Canada.

The technology could be used in a variety of insurance applications, including risk assessment and pricing, fraud detection, personalized insurance products, claims processing, asset and investment management, catastrophe modelling, automated and advanced underwriting, and advanced actuarial calculations.

“Actuaries are probably counting the days when they can get their hands on this technology to create more sophisticated models of their customers and their risks,” says Brad Powell, vice president of software engineering with Rival Insurance Technology.

“This could drive more intelligent insurance products tailored to the specific needs of individual customers.”

The industry needs to consider how quantum affects existing insurance policy coverages, these experts tell CU. That could mean assessing whether observable aspects of quantum computing risks can be incorporated into existing cover, says George Beattie, head of innovation at CFC Underwriting.

Or it could mean proceeding by way of endorsements or exclusions.

Giving the topic advance consideration “means we don’t get trapped at the 100,000-foot, conference-view level for decades, to the increasing frustration of the companies and people we’re supposed to be serving,” Beattie says. “You can be a fast follower. I think the point is, just have your radar up and be in receive mode.”

Modelling risk, finding fraud

Quantum’s speed lends itself to the re-architecture of business processes, Kraay adds. For instance, quantum may allow for real-time, large-scale traffic pattern analysis across multiple cities, which would benefit auto insurers.

Alternatively, Agnihotri says, it could more efficiently analyze vast amounts of data to assess risks like natural disasters, in turn helping property insurers better understand and price their products.

“Quantum computing can improve catastrophe modelling by accurately simulating natural disasters and their potential impact, aiding in better preparation and risk mitigation,” he adds. “This is especially useful for countries like Canada, the second-largest country in the world, which has a wide variety of geographical challenges.”

Fraud detection is another potential use case.

Quantum computers can process large datasets to detect subtle patterns indicative of fraudulent activities that may be missed by classical computers, Agnihotri says.

Since these computers can analyze transactions or perform simulations in real-time, this also could help insurers detect and prevent fraud in real-time.

This article is excerpted from one appearing in the February-March 2024 print edition of Canadian Underwriter. Feature image courtesy of iStock.com/bpawesome