POV - Measures insurers can take now, to equip themselves for the transformation quantum computing will bring in
Quantum computing has been in the news enough to turn the heads of all leading businesses across the world. It is imperative for any business identify technologies that can disrupt their business. Ignoring them would lead to examples like Kodak, Nokia, Xerox, yahoo which failed to keep up with Apple, Google, IBM and lost the race. Therefore, we see lot of insurers like Progressive, acknowledging and betting big on Quantum computing and its applications. This article is not about Quantum computing or its applications in insurance. But given the current level of technological maturity, here are four measures insurers can take to stay ahead of the game.
1. Reimagining Core Systems for Quantum
It is estimated that for every $1 spent in innovation, organizations need to spend additional $7 in core execution. Most insurers today have Application modernization as their key agenda and this is not possible without having a modern core system. Now, Imagine a Quantum world where you can store 2X the amount of data and communications with 2X the speeds of today. Will your Core systems be able to handle the 4X advantage of Data and Speed? Moving towards Microservice architecture, API framework, Big data and enterprise platforms will go a long way in being ready for the Quantum shift. Hence it is important for insurers to harvest their Legacy systems and prepare the decommission plans to give way to decoupled, feature based systems that can easily consume and handle the shift towards the Quantum architecture
2. Data Protection Road map
We all know that with Quantum processing, 70% of the data encryption today stands at risk. Data is the prime driver in Insurance and there is an ever-increasing risk of privacy and theft. Inaccurate, manipulated or insecure data could become an enterprise level existential threat. It is estimated that there will be 50 Bn connected devices generating close to 500 Zetabytes of data per year. With so much of information, it has become equally important for companies to safeguard them. Most insurers are coming into the purview of GDPR and other applicable guidelines which enforce the encryption and data usage standards. Hence, the insurers must look at the 360 degree view on their customer data usage – from technology standpoint – encryption, storage, access etc. and from a business standpoint – users, access rights, data lifetime etc. Having a control on the data for the insurers will not only ease out the transition to Quantum encryption but also minimize the access of their client data so that the even the technology risk is reduced.
3. Comprehensive Risk Modelling
“In god we trust, for everything else we need data”. Data has been the life blood of Insurance, fueling every aspect of business form underwriting to detecting fraudulent claims. According to Gartner’s hype cycle for Digital Insurance 2019, Artificial Intelligence will be a hygiene factor and no longer be a coveted piece of jewel for companies. Some of the main reasons why insurers are not able to harness true potential of Artificial Intelligence is due to limitations in Data and Processing power. Quantum computing will become the necessary catalyst for the AI transformations in insurance as it can provide massive data storage and access capabilities along with extreme computational performance for simulation and optimization. This will help the insurers store more information, about the customers, partners, risks and create weather forecasting models, patterning consumer behavior and operating self-driving vehicles etc. The capability to use geospatial data in claims, big data in claim frauds will increase multi-fold. With a better computing power, insurers will be able to test waters in different AI models faster to see the value in it for them. To be ready for this huge upgrade in data storage and processing power, insurers must have a long-term view on their business functions. Insurers must look at new sources of data even though they cannot use them now. The underwriting models must be flexible to account for all the data sources. The data storage especially with claims must be done with a futurist view. The insurer may not know what the dark data in the enterprise means to them NOW. But eventually with the Quantum enabled systems, this could become necessary inputs to experiment, build and derive business insights out of it.
4. Ready for Connected Insurance
The connected future is inevitable. There are going to be more connected devices than humans by 2025. Insurers have been experimenting with IOT devices and sensors that provides additional stream of customer data and insights. However, connected insurance has not entered the mainstream insurance due to challenges like Data storage and processing (50 TB by 2020), compatibility with existing models, data privacy and ownership, trust of customers and data security. The infrastructural challenges are one of the key reasons why insurers are not able to onboard the connected journey. Quantum computing will increase Edge analytics through the computation and storage capabilities of these devices increases multi-fold. This will enable the insurers to derive quick and meaningful insights from the new streams of customer data. Developing use cases that benefit the whole eco-system, addition of new data sources, partnering with device manufacturers are some key areas they can concentrate on. Insurers should see the development of IoT services for ecosystems as a long-term investment in future capabilities.
Given quantum’s potential for radical industry transformation, leading insurers should consider acting now. We’re heading down an entirely new field of physics, and by its very nature there will be discoveries, innovations and solutions we have never dreamed of yet. Quantum computing is the next technological frontier that will change the world. Without adequate research, coordination and implementation strategies in place, insurers risk falling behind global competition in the cyberspace race. Insurers should begin building their long-term capabilities now to expand their market position and develop innovative, competitive services for their customers in the years ahead.
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