August 13, 2019 by Greg Meckbach
“We are getting a broader base of customers. It’s not just millennials,” Rowan Saunders, president and CEO of Waterloo, Ont.-based Economical, told Canadian Underwriter Monday.
Economical reported Aug. 1 that Sonnet generated gross written premiums of $50.6 million during the three months ending June 30, an increase of 96.3% over the second quarter of 2018.
Millennial is a term that generally refers to people born between 1982 and 2001.
“Clearly, Canadians are resonating with Sonnet, and we have been very focused on scaling the business but doing so profitably,” Saunders said in an interview.
Economical reported gross written premiums of $659.2 million in the quarter.
For the first six months of this year, about 7% of Economical’s premiums were from Sonnet.
Economical launched Sonnet in 2016, allowing clients to buy auto, homeowner, condo, landlord and tenant insurance online.
Suppose Sonnet takes in $50 million a quarter. That would be $200 million a year.
So if Sonnet was an independent, stand-alone insurer how big would it be, in the general scheme of things?
There are a couple of ways of looking at it. Using Canadian Underwriter’s recently-released statistical guide, Sonnet would have less than 0.5% market share and rank below 30th place in the Canadian P&C market. It’s only about 10% of Economical, which is smaller than each of Intact, Aviva and Desjardins.
But another way of looking at is Sonnet is now bigger than each of Portage La Prairie Mutual, Peace Hills General, Boiler Inspection and Insurance Company, Trisura, Heartland Farm Mutual and Saskatchewan Mutual – if you measure size by premiums.
Wondering what Sonnet’s revenue growth will look like in the short term?
Saunders said Monday that Economical does not make public any forecasts or budget of what percentage of Economical’s premiums would come from Sonnet for any period after the latest quarter.
There is a growing segment of the market that wants to buy insurance directly over the Internet, said Gerry Hooper, chairman emeritus of Economical, during the insurer’s annual general meeting in 2018 in Kitchener. “We only need to look at the success of the Amazons. The development of Sonnet is necessary for our future.”
By not using the Economical brand for its direct writer, Economical was aiming to be respectful towards its broker partners, Saunders noted in 2017 during the CEO Panel at the Insurance Brokers Association of Ontario’s annual convention in Ottawa.
“Sonnet attracts a different consumer than Economical,” said Tom Super, director of the insurance practice at J.D. Power, in an interview this past February. “So if you are interacting with Sonnet, you have a higher expectation with being able to have a great online experience but if you have higher expectations when it comes to things like agents, Sonnet is not positioned to perform well in that regard.”