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Auto Insurance Rates Rising

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Due to an improving economy, job growth and record low gas prices, Americans are driving more. In fact, 2015 was the most heavily traveled year in history, with drivers logging more than three trillion miles, a 3.5% increase over 2014, according to the U.S. Department of Transportation.
The inevitable consequence of more miles being driven? More accidents, says Jeanne Salvatore, senior vice president and consumer spokesperson at the Insurance Information Institute Opens a New Window. .

When the number (and severity) of accidents rise, claims costs increase, says Salvatore. “Everything is costing more – from the size of claim settlements to litigation costs, medical costs to auto repair, which has gotten more expensive because people are buying more new, more expensive cars.”

Insurance companies are passing these costs onto you, the consumer, in the form of higher auto insurance premiums, says Joan Schmit, distinguished chair of risk management and insurance at the University of Wisconsin-Madison.

The federal government’s Consumer Price Index (CPI) for auto insurance – a proxy for policy rate activity – shows that prices have risen every single month this year.

Haven’t been hit with a rate hike yet? Buckle up, because it’s probably coming, says Schmit. “Insurers can only change rates every six months or so and they also must have rate increases approved by state regulators, so it can take a while.”

How Insurers Can Maximize the Value of Digital Disruption

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The role of digital technology in the insurance ecosystem is rapidly shifting, from being a driver of marginal efficiency to an enabler of fundamental innovation and disruption.

Digital transformation provides the insurance industry with unparalleled opportunities for value creation and capture; expanding profit pools; creating new revenue models; and enabling unprecedented access to global markets.

In January of 2016, the World Economic Forum, in collaboration with Accenture, released a report on the insights and recommendations discovered in the Digital Transformation of Industries (DTI) initiative. A key component of the DTI project has been the quantification of the value at stake for both business and society over the next decade from the digital transformation of six industries. The value-at-stake analysis suggests that the “combined value” – to society and industry – of digital transformation across industries is upwards of $100 trillion over the next ten years.

Yet, digitalization could produce benefits for society that equal, or even surpass, the value created for the insurance industry – the mass adoption of autonomous vehicles and usage-based car insurance, for instance, could save around 1 million lives by 2025.

The initiative also found that both customer expectations and technology are advancing at breakneck speed: The combinatorial effects of these technologies – mobile, cloud, artificial intelligence, sensors and analytics among others – are accelerating progress exponentially:

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