Quantification:
As we have started our new financial year 2025-26, the service industry stands on the brink of a technological revolution. Beyond artificial intelligence, cloud computing, and blockchain, another powerful technological force is emerging—Quantum Computing. Once considered the domain of physicists and academic laboratories, quantum technology is now poised to disrupt business paradigms, especially in complex, data-intensive sectors like insurance.
What does the buzzword Quantum Computing mean?
Quantum computing leverages the principles of quantum mechanics to process information in fundamentally new ways. Unlike classical computers that use bits (0 or 1), quantum computers use qubits, which can exist in multiple states simultaneously due to superposition. They can also be entangled—meaning the state of one qubit can depend on another, even at a distance—allowing exponential increases in computational power.
Why do insurers even need to talk Quantum?
The insurance industry is intensively probabilistic and data-driven, making it a natural beneficiary of quantum advances. With petabytes of structured and unstructured data from claims, underwriting, customer behavior, IoT devices, and regulatory filings, insurers face complex optimization problems that classical systems struggle to solve in real-time.
Quantum computing holds the promise of revolutionizing several core functions:
1. Quantum Risk Modeling
Traditional risk models often rely on linear or Monte Carlo simulations, which become computationally expensive for large portfolios or high-dimensional data. Quantum algorithms such as quantum Monte Carlo or amplitude estimation drastically reduce simulation time, enabling real-time pricing and better management of catastrophe risks, reinsurance strategies, and solvency capital requirements.
2. Fraud Detection and Claims Analysis
Quantum machine learning (QML) can identify subtle fraud patterns in vast datasets that may be invisible to classical algorithms. With enhanced pattern recognition, insurers can detect anomalies, assess claims faster, and reduce leakage. The combination of QML and blockchain could also offer quantum-safe, tamper-proof claims verification.
3. Portfolio Optimization and Asset-Liability Management (ALM)
ALM involves solving complex, multi-variable optimization problems under uncertainty. Quantum computing can significantly speed up portfolio rebalancing, scenario analysis, and capital allocation, resulting in superior investment strategies and better regulatory compliance (a fit candidate which may be harnessed under IRDAI’s Risk-Based Capital regime).
4. Underwriting and Pricing Precision
Quantum-enhanced predictive models can incorporate larger data volumes—from customer demographics and driving behavior to climate forecasts and genomics—without simplification. This allows hyper-personalized insurance products, dynamic pricing, and better loss ratio management.
5. Climate and Catastrophe Modeling
Insurers increasingly face climate-related uncertainties. Quantum computing can help process granular satellite data, oceanic models, and emissions simulations more accurately, improving predictive power and enabling resilient underwriting for climate-sensitive sectors.
Is it still just a buzzword in 2025?
- IBM (Eagle processor (127 qubits), Osprey (433 qubits), and Condor (1,121 qubits).), Google (Willow (105 qubits)) have already released quantum systems with over 100 stable qubits.
- Financial institutions like Allianz, Munich Re, and AXA are piloting quantum algorithms in partnership with quantum startups.
- Regulatory bodies, like the SEBI, have begun exploring quantum-safe cryptography standards to protect sensitive data. Quantum Key Distribution (QKD) and Post-Quantum Cryptography (PQC) are emerging technologies that can provide quantum-safe encryption
- India’s own National Quantum Mission (NQM) (https://dst.gov.in/national-quantum- mission-nqm) and the growing Quantum Computing Centers across IITs and IISc further position the Indian insurance sector to adopt this frontier technology.
The picture is not all rosy:
While quantum promises much, its enterprise-grade deployment still faces challenges:
- Error Rates and Decoherence: Qubits are fragile; stabilizing them for extended computation remains a technical hurdle.
- Quantum Talent Shortage: The demand for quantum scientists and engineers far exceeds
- Cybersecurity Risks: Quantum computers could potentially break current The industry must pivot toward post-quantum cryptography.
As an Insurer how should we prepare ourselves?
1. Build Quantum Awareness: Educate organization leaders and technical teams about quantum
2. Form Strategic Alliances: Collaborate with quantum startups, research institutes, and tech giants to create win-win POCs.
3. Invest in Hybrid Infrastructure: Develop cloud-native systems that can integrate with quantum-as-a-service platforms.
4. Quantum-Proof Security: Begin transitioning to quantum-resistant algorithms for data
The quantum leap is near. Are we ready to take it?
Quantum computing is no longer a distant dream of research scholars and physicists – it’s an imminent reality. For forward-thinking insurers, 2025–26 is the window to experiment, and innovate with quantum technology. Those who embrace it will unlock new efficiencies, reduce risk exposure, and reimagine the customer experience and tap the beginners’ advantage.
Authored By:
Durbadal Mukherjee, Chief Manager, National Insurance Company Limited
