Economical Insurance calls for policyholders to check eligibility during demutualization process

Economical Insurance calls for policyholders to check eligibility during demutualization process | Insurance Business

Economical Insurance calls for policyholders to check eligibility during demutualization process

With its demutualization in the works, Economical Insurance has said that it will be reaching out to its over 630,000 eligible policyholders to remind them to participate in the process.

The company has yet to announce the exact date of its planned demutualization, which transitions Economical Insurance from a mutual company to a publicly traded share company. But eligible policyholders who do not register online will miss out on any “potential financial benefits,” the insurer warned.

Economical is holding a social media campaign to reach out to its thousands of policyholders to remind them of the planned demutualization.

“At a time when many Canadians are under financial pressure, this campaign is timed to ensure as many eligible policyholders as possible are aware of their potential financial benefits,” said Economical Insurance vice-president of marketing and communication David Bradfield. “Encouraging more policyholders to register will also facilitate the process associated with our future Special Meeting, where more than 630,000 Canadians will have an opportunity to vote to approve our demutualization.”

Economical has recommended policyholders to check the website, joininourfuture.com, to check if they are eligible.

Customers who held a policy for the 12-month period ending on November 03, 2015, may apply for one-time financial benefits in the form of cash or shares, Economical added.

In a previous statement to Insurance Business Canada, Economical Insurance president and CEO Rowan Saunders explained that the company chose to go through with demutualization despite its position as one of the leading P&C insurers in Canada because it needs the capital for further growth.

Read more: History in the making

“Demutualization fulfills our aspirations of being a top-five player in this business,” the chief executive said. “One of the fundamental strategic questions is: Do we take a scale approach, or do we take a niche approach? In order to take a scale approach and be a leader in the market, we need access to capital because that will allow us to participate in faster growth than otherwise organic capital generation would enable. It allows us to raise funds and make acquisitions in a Canadian environment that is consolidating and make some of these bigger investments around technology that are required to be relevant to customers over the decade ahead.”

In a statement, Economical Mutual Insurance chair of the board of directors John Bowey addressed policyholders' concerns about how the current pandemic impacted the demutualization process.

"The simple answer is we don’t yet know," Bowey said. "For some time now, you’ve heard me say that there are three key areas that need to come together before we can finalize the timing of our IPO. First we need to improve our performance, second we need to complete the necessary regulatory and governmental approval steps, and lastly we need to ensure capital market conditions are favourable."

Bowey mentioned that prior to the outbreak, Economical had been building up in all three areas, and that 99% of eligible policyholders had voted in favour of proceeding with demutualization during the company's second special meeting in 2019. But since the COVID-19 pandemic struck, the company's efforts have slowed down. Economical is also still working on the regulatory steps necessary before it can call a final, third vote.

"In this environment, it is impossible to deliver a responsible prediction about the timing of our future IPO, and therefore our third vote. While we don’t yet know when the final special meeting will happen, we can confirm that it will not be held in 2020, as we expected before the pandemic," the board chair explained. "For now, there are too many unknown factors affecting our business. Almost all of those unknown factors are related to the impact that COVID-19 will have not just on us, but on the Canadian economy as a whole and on capital markets. And, for the most part, they are not within our control and so a final decision on the timing of our IPO must wait for now."