The red telephone is a symbol of the Cold War and also the brand image of one of the insurers with the greatest commercial momentum in Spain, Línea Directa, characterized for years by the aggressiveness of its offers. Unlike the device that, according to popular belief, connected the president of the United States with that of the USSR, the one from the Spanish company is mounted on four wheels because the activity has until now been oriented mainly towards the automotive industry. And this specialization has recently become an uncomfortable dependency that Línea Directa wants to get rid of with a diversification plan whose star product is health insurance.
The automobile insurance business generated income of 792 million euros for Línea Directa last year, more than 80% of the total. It is by far the main branch of activity and also a headache. After twenty years of falling premiums, insurers unexpectedly encountered an explosive return in mobility after the pandemic and, with it, accidents. The invasion of Ukraine added a sharp increase to car repair costs and, to make matters worse, injury rates rose 12% in just two years. The result is a loss-making business in which, in the case of Línea Directa, costs were equivalent to 104% of revenue in 2023.
In a recent meeting with the press, the group's CEO, Patricia Ayuela, acknowledged that the red phone should look elsewhere. “We have launched a plan to recover margins and profitability” that involves “accelerating diversification,” she stated. The commitment involves “a new multi-product organization, a single brand and strategic alliances,” she added. There are already agreements in place to cross offers with Cepsa, Norauto or Movistar Prosegur Alarmas.
The company is looking for the solution through health insurance. This area is already generating positive margins and is approaching breakeven. It has 117,000 clients and is growing in services for companies, of which there are already more than 50 in the portfolio.
Last year, Línea Directa closed with losses of 4.3 million euros, compared to a profit of 63 million in the previous year. The positive element is that the accounts went from less to more, to the point that 2023 began with a gap of 111% in automobile insurance – for every 100 euros of income, 111 of expenses – which evolved to 98, 2% at the end of the year. “It is a positive technical result,” argues the company.
The problem of the hotline with the automotive industry has not been experienced with such intensity by other competing insurers such as Mapfre or Mutua Madrileña despite having more automobile clients. They are larger and more diversified, as explained by their managers in the latest results presentations. In the case of Mutua, it has a powerful alliance in health insurance through SegurCaixa Adeslas.
According to data from the consulting firm ICEA, Línea Directa is the fifth national auto insurer, with 7% of the market – ahead are Mapfre, Mutua, Allianza and AXA. However, it is thirteenth in home insurance, with just a 3% share, and twenty-third in health insurance, with 0.3%. If he brings in 792 million with cars, the home business brings in 149 million and the health business, where he now wants to multiply his efforts, barely 30 million.
The diversification effort of the insurer, which will hold its shareholders meeting this week, does not end there. It has launched anti-squatting insurance and others related to new mobility, which cover scooters or bicycles. This year it plans to launch two new products whose contents are kept secret.
The dependence on the automotive industry explains, in the company's opinion, its poor performance on the stock market since Bankinter, which currently holds 17% of the capital, decided to put it on the market in 2021. Its shares have fallen by nearly 44% since that moment, placing the group's capitalization at 979 million euros, although so far this year they have risen nearly 8%. “In 2024 we start from a much better starting point” and “the plan is to continue accelerating the recovery,” says his CEO.
