Emerging risks

Emerging risk 1

Emerging risk 2

Self-driving car

Ageing population

Category

Environmental, societal, economic and technological

 Societal and economic

Description

The self-driving car is a vehicle capable of performing all driving functions. between an origin and a destination without the need for human intervention at any point.

The use of this type of vehicle generates a type of accident rate unknown to the company and the sector, as well as the cover to which an insurance company is liable in a market that is increasingly oriented towards a sustainable and technological mobility. 

There are currently no self-driving cars on the market in Spain, although there are several projects under development. On the other hand, current legislation does not allow the driver to give up control of the steering wheel at any time, so self-driving cars would not be allowed in Spain today, even if technology made it possible. In some US states, such as California, the use of semi-autonomous driving that involves letting go of the car’s controls is permitted. 

The proportion of elderly individuals has increased by 21% in 2020 for people over 65 years old and by 3.4% for individuals over 80 years old (almost double in two decades).

In Spain, the driver's license census from the Directorate General of Traffic (DGT) reveals that there are more than 27 million drivers, with almost 16% being individuals over 65 years old. Furthermore, of the 1,273 victims of road accidents that occurred on interurban roads in 2022, 283 were over 65 years old, while on urban roads, out of the 473 fatalities, 184 were also over 65 years old, accounting for 39% of the total, the largest group of victims.

For this reason, population aging, loss of purchasing power, and more restrictive driving regulations pose a risk whose long-term behavior is unknown. Consequently, the demand for insurance may decline as the proportion of this age group increases, although the emergence of autonomous driving may mitigate this risk.

Impact

Línea Directa could be impacted by this emerging risk given that it impacts in its key portfolio. Although this impact would be progressive.

• Uncertainty about the legislation applicable to the use of this type of technology in vehicles in Spain. Línea Directa identifies possible legal loopholes and uncertainties due to the lack of an exhaustive analysis of the case, which does not allow the possible responsibilities to be delimited with certainty.
• Línea Directa contemplates a great uncertainty about the coverage with which to insure the vehicle, as well as the determination of the scope of liability of the insurance companies, the vehicle manufacturer or the software designer. Their claim processes would have to be reviewed for this type of vehicle.
• Given the uncertainty about whether the software and AI developed by third parties behave ethically, or whether what is developed by a third country should be applied in Spain or in the EU, Línea Directa would be committed to regulation and would have to assess the different ethical responses of the different software.
• Adaptation of infrastructures in the national territory (traffic lights, beacons, etc.) to improve current accident rates. This aspect could impact underwriting depending on the geographical area.
• Economic losses resulting from not adapting to changing consumer preferences or not meeting new business demands by not assimilating the changes resulting from an acceleration of digital transformation. The areas of product and coverage innovation would have to have information to generate value solutions for the client.
   

The most significant effects we have observed from this risk are the following:

• Changes in the mobility consumer basket in search of cheaper alternatives to the personal car, which could progressively impact the average premium of Línea Directa's car portfolio.
• Regulatory restrictions (age, physical condition...) and decreased need for insurance offered by Línea Directa (mainly in the motor segment).
• Uncertainty about the accident rate in relation to the physical conditions of the elderly population. Applicable to all business segments of Línea Directa: Cars, Home and Health.
• New profiles of 'young' clients related to people from other countries who are gradually moving to Spain, which would entail a rethinking of the marketing strategy and a review of the distribution channels.
   

Mitigating actions

The actions that Línea Directa is taking to mitigate these risks are as follows: 

• Training and study in algorithms, analysis of autonomous mobility and statistical models of new mobility variables (infrastructure, black boxes...) for the development of the new business. Línea Directa currently markets insurance for vehicles with ADAS, and uses the learning obtained from the accident behaviour of this type of technology to apply it to self-driving vehicles.
• Constant monitoring through Línea Directa Group’s Regulatory Radar to identify any legislative changes applicable to the company’s sphere of activity.

The actions that Línea Directa is carrying out to 
mitigate the situation:

• Understanding the needs of the ‘older’ population: mobility safety, home automation, personal services (companionship, home repairs, etc.) and health.
• Understanding new ‘young’ customer profiles from other countries that are offsetting the ageing of Spain’s population.
• Constant monitoring through Línea Directa Group’s Regulatory Radar, with the aim of identifying any new or existing changes in the relevant legislation, whether in the area of data protection or regulatory developments, among others.