The battle of tech in insurance – the metaverse, Gen AI and quantum computing

The battle of tech in insurance - the metaverse, Gen AI and quantum computing

Generative AI, the metaverse and quantum computing are three of the most exciting emerging technologies currently in the market. Rather than being left behind by competition, insurance leaders urge companies to experiment with the technology to explore how they can make the most of it.

This revelation came from a panel discussion held last week by global insurance giant Generali in partnership with FinTech Global. The event welcomed senior insurance executives, innovators and decision makers to discuss how the Metaverse, quantum computing and generative AI could revolutionise the insurance industry.

The panel was moderated by Emanuele Colonnella – innovation activation lead at Generali. The rest of the panel included Apu Mitra, tech innovation strategy assoc director at Accenture, Philip Lobatto, director financial services at Microsoft, Artur Niemczewski, non-executive director at Chartered Insurance Institute and Romeo Radanyi, director of quantum architecture at Moody’s.

Over the course of the hour, the five panellists discussed how the metaverse, quantum computing and generative AI are disrupting insurance and how the technology will evolve in the coming years.

Accenture’s Apu Mitra explained that organisations are innovating faster and the technology change is going through a paradigm shift, which is transforming how we create content, connect, communicate and interact.

Mitra added, “The convergence of Quantum, Generative AI and the Metaverse, all three big technologies are going to evolve and revolutionise the way we use it to interact with each other and the world around us. What we know for sure: Businesses that establish a foundation and learn in the market early are best positioned to take advantage of emerging opportunities. Business models and key players will continue to change as this convergence of technologies matures and adoption expands.”

The metaverse

The first technology discussed was the metaverse. This is a 3D enabled digital space that leverages virtual reality and augmented reality to create an online version of the world where people can interact with one another. Financial services are already getting involved with the technology, for example, JP Morgan built a lounge on the Decentraland metaverse.  FinTech Global recently spoke to several players within the insurance sector about what the opportunity the metaverse brings to insurance.

Mitra stated that the metaverse is a great environment to build, test and explore business models in a 3D equivalent of the real world. This will bring a plethora of applications for insurers and brokers. For example, loss adjusters could feed real-time risk information using a digital twin to alert insurers with images or videos from live claims into simulations powered by AI and quantum computing to create a 360-degree view of claims, and test and tweak loss scenarios remotely, he explained.

Another potential use case, Mitra outlined, was for insurers and brokers to model risks in 3D to help insureds mitigate losses and underwriters can simulate physical risks and scenarios to improve risk pricing and selection.

He added, “The responsible use of these convergence technologies could dramatically change the workplace and help employers offer a better recruitment, employment on boarding experience and creating virtual workspace to overcome some of the challenges of hybrid working, bringing people together from anywhere across the world, building organisational culture and enhancing learning.”

Quantum Computing

Quantum computing is an evolving technology space that utilises the laws of quantum mechanics to help solve problems that are too complex for traditional computers. In the context of insurance, this technology could be used to assess a high volume of variables and data to improve risk calculations.

Currently, quantum computers are mostly referred to as mammoth structures and can cost millions of dollars, although there are advancements to make them more compact. With that picture and given the nature of the problems which sit nicely with quantum computers, like optimization, capital management or risk assessment problems, it is unlikely that firms are going to have their own internal computers that employees will be playing around with for their everyday tasks. The more likely scenario will be a firm leveraging the capabilities of a quantum computer through the cloud and handling complex calculations for underwriting purposes.

Radanyi emphasized quantum computing is also a double-edged sword. While it has the potential to revolutionize various industries, insurance included, it also poses risks, particularly in the realm of cryptography and data security. Shor’s algorithm, a quantum algorithm developed by Peter Shor in 1994, is a prime example of this dual nature. It can efficiently factor large numbers, which has significant implications for cryptography and ultimately for cyber risk insurance since many widely used cryptographic schemes, such as RSA, rely on the difficulty of factoring large numbers to ensure data security. Classical computers struggle to factor large numbers in a reasonable time frame, making these encryption methods secure. However, with Shor’s algorithm, a sufficiently large quantum computer could factor these large numbers quickly, thereby breaking the encryption and compromising data security.

Generative AI

Of the three technologies discussed in the panel, generative AI has been the one to get the most attention recently. The sudden release of Chat GPT at the tail end of 2022 sparked curiosity and excitement for the technology. Within its first month it had attracted over 57 million users, and current estimates put daily users at 13 million.

The panel explained that during the 20th century, the blue collared worker became much more productive using technology. For example, factories started implementing robots and conveyer belts that revolutionised operations. However, this same level of productivity boost has not really happened for the white collared worker. Generative AI can be this revolution. This technology can help firms to automate the writing of emails or generate content for presentations or transform various other workflows.

The panel also described the launch of generative AI as the iPhone moment for business. Much like the growth of the iPhone within the mobile space, generative AI will transform how industries work and while there will be some losers, others will boom in the market. Firms just need to see how they can take advantage of the technology, or they could be left behind.

However, this is not the end of human input. The panel made it clear that human-in-the-loop is still necessary, at least for now. These generative AI tools are not infallible and can make mistakes or they can reach incorrect decisions due to bias. A human is still needed there to guide the technology to ensure accuracy. On top of human-in-the-loop, training the AI technology on internal datasets, rather than relying on third-party data, can boost the accuracy of the technology and reduce the chance of error.

Experiment with the tech or be left behind

One of the key takeaways from the discussion was that firms should experiment with this emerging technology to find that golden use case. Firms should take the time to examine the metaverse, generative AI and quantum computing and how the technology could be leveraged to get a competitive advantage. There is no easy answer of how the technology could be used, each business needs to find how it can work for them.

The panel emphasised that there is no point waiting to see how others are going to leverage the technology as it will already be too late. The best port of call is to innovate and experiment as there is nothing a firm can lose from trying.

As for where to start, the panel urged companies to only focus on internal operations. Explore how the technology can reduce manual workloads or evolve processes. Use cases for B2C will come at a later stage, when there is more regulation to ensure safety, but also when the technology becomes more advanced to handle more complex tasks.

The rise of regulation

Another point that was emphasised by the panel was the impending nature of regulations. While AI is having an increased presence within the financial services, regulators are increasingly looking into the technology, especially as the technology gets more advanced.

Since Chat GPT launched in 2022, businesses and individuals have spent hours discussing how this technology could transform how people work. Whether this is people being replaced by the technology, ways to transform customer engagement or even to assist with decision making. Unfortunately, it is not as simple as just implementing AI technology and letting it transform workflows. While the technology brings great opportunities, it also has some very big risks. These risks include bias, a lack of ethics, or an inability to tell fact from fiction.

Due to these risks, regulators are looking at ways to foster the safe use of AI within financial services. These are already coming. In the UK, for example, the government recently released a whitepaper outlining the five principles for the safe use of AI within business. These principles are safety, security and robustness, transparency and explainability, fairness, accountability and governance, and contestability and redress. Around the same time as this, the FCA, PRA and Bank of England released their own consultation around the use of AI, including its own set of principles.

In this context, the panel warned that greater regulation is coming to AI and firms cannot just assume they will be able to just implement generative AI tools for their underwriting decision making without any regulatory requirements dictating its usage.

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