Canadian Underwriter

Launch into direct-to-consumer market expected soon, demutualization packages being mailed: Economical Insurance

May 4, 2016   by Canadian Underwriter

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Economical Insurance’s “journey towards becoming a strong, Canadian, independent public company is now well under way,” a leg of which will include a strategic expansion into the direct-to-consumer market, president and CEO Karen Gavan said during the mutual’s Annual General Meeting (AGM) Tuesday.

The separately branded direct channel – expected to be launched later this month – “will operate independently from our broker channel and allow us to compete with market leaders and reach a segment of consumers that we currently do not serve,” Gavan told attendees.

“We are confident that a multi-channel distribution model will optimize our position in an increasingly competitive marketplace,” she added.

Related: Economical Insurance to launch direct channel sometime in 2016

“Our focus on putting customers first in whatever purchasing channel they choose, leveraging advanced analytics in pricing segmentation and product delivery will create a competitive advantage for us in the digital space,” she said.

Noting that technology is disrupting the insurance industry, “our in-depth research has shown there is a clear divide between consumers who trust and value the advice of a broker and those consumers who are more self-sufficient, preferring to purchase insurance through direct channels,” Gavan explained.

Karen Gavan, president and CEO of Economical InsuranceBut the company’s longstanding relationship with brokers will continue. “Our broker partnerships are a key pillar of our growth strategy,” Gavan (pictured right) said.

“We are investing in the Guidewire policy administration and billing systems that will revolutionize the way our brokers do business with us,” she told attendees. “Our speed to market will improve, as will our product line and operating efficiency. This will help drive down costs and enable our broker partners to focus on what they do best: selling our products and giving advice to our customers.”

With regard to demutualization, David Wilson, chair of the Board of Directors’ special committee on demutualization, said more than 1.2 million of Economical’s policies have been analyzed to identity eligible policyholders. “As a result of that work, we identified over 630,000 eligible policyholders – mutual and non-mutual – who will have a role to play in the process we’ve initiated,” Wilson said.

As well, the company has worked with the primary regulator to obtain its approval for a formal and detailed notice for demutualization to be sent to all eligible policyholders. Earlier this week, packages introducing eligible policyholders to the process and advising them of the work ahead started being mailed to individuals, families, farms and businesses across the country, he reported.

David Wilson, chair of the Economical Insurance Board of Directors' special committee on demutualizationThe notice will include instructions on how to access a customized self-serve portal. “That portal will allow us to have a direct communication channel with all eligible policyholders, better manage the timely flow of information between us, and to offer tools that demystify this process. As a policyholder, you can track your status and review your policy details that relate to demutualization,” noted Wilson (pictured left).

Once mailings are complete, committees representing mutual and non-mutual policyholders will be formed, Wilson explained. Eligible policyholders can apply to be on these two committees, although the court will set the application process.

“We do not expect that applications will be accepted until much later this year,” Wilson said. The court will review applications and appoint the policyholder committees, he said, expecting this “should take until the beginning of next year.”

Committees have “12 months from the date of their court appointment to reach an agreement on terms that will go into the conversion proposal, and for Economical to get actuarial and other opinions,” he reported.

“Our strength and the performance of the past few years is the reason we have embarked on this plan,” Wilson said at the AGM. “As a publicly traded company, we will have the financial flexibility to accelerate our growth.”

Calling this a “pivotal moment in Economical Insurance’s history,” the mutual insurer has “an ambitious strategy that supports our vision to be one of Canada’s top property and casualty insurers, recognized for our business innovation and how well we take care of our customers,” Gavan said.

“We are striving to be the carrier that thinks differently about insurance. As an organization we really want to change how Canadians feel about insurance,” she pointed out. Economical Insurance is “ready to become a public company, compete with market leaders as a successful multi-channel distributor, and be the insurance partner Canadians can trust to protect what they value most.”