Demutualization of The Economical might pressure other mutuals to do the same

If The Economical does in fact demutualize, as its board of directors recommended to mutual policyholders in December, there will be pressure on other mutuals – those with a narrow base of policyholder owners – to do the same.
MSA Research president Joel Baker made the observation in his article, ‘The Battle for The Economical Mutual Group,’ published in MSA/Baron Outlook Report Q3-2010.
There are conflicting opinions within the industry about whether The Economical would represent the first P&C demutualization. But Baker said one central question is whether this would be the last.
“Are mutuals a historic relic, a dying breed?” Baker asks rhetorically in his article. “Indeed, no new mutual has been created in most living memories and it is unlikely that any will.
“In the case of mutuals with narrow ownership structures such as TEIG [The Economical Insurance Group], Gore [Mutual Insurance Company] and a few others, the few mutual policyholders (golden-ticket Wonka Bar owners) have a built-in incentive to realize the value of their ownership that may be worth five, six or even seven figures (depending on the formula used) and cash out.
“If TEIG demutualizes, pressure will build on boards of similar organizations to follow suit.”
Baker said the pressure to demutualize would not be as great on mutuals with a broader base of mutual policyholder owners.
“In cases where the mutual ownership of the companies is widely held among the policyholders, such as Wawanesa’s case, the potential payouts will be smaller and thus there will be less pressure on the boards of those companies.”