History in the making

History in the making | Insurance Business

History in the making

Economical Insurance president and CEO Rowan Saunders opens up about the P&C insurer’s landmark demutualization

One of Canada’s oldest P&C insurance companies, Economical Insurance is steps away from becoming the first Canadian mutual insurer to transition to public owner-ship. Steering the ship on this transforma-tional journey is president and CEO Rowan Saunders, who has thrived on change during the course of his 32-year insurance career.

In 1984, Saunders made the first big change of his life, immigrating from his native South Africa to Toronto, where he went on to obtain a bachelor of arts degree from York University. While studying, Saunders followed in his father’s footsteps and took a summer job as an insurance broker. This piqued his interest in the insurance business, and after university, he became a management trainee at RSA Canada.

What followed was an incredibly diverse 29-year tenure with the Canadian general insurer, which saw Saunders progress from management trainee to CEO – a position he was appointed to in 2003 and held for 13 years. During that time, RSA Canada grew from the 10th largest to the third largest P&C insurer in Canada.

Throughout his time at RSA, Saunders held positions in commercial lines underwriting, personal lines leadership, corporate marketing and corporate finance, all while working in different regions across Canada. He even took secondment to the UK, where he focused on the life insurance business, and was a member of RSA’s global executive committee.

“All of these broad and varied experiences prepared me for the significant role I've undertaken by joining Economical,” Saunders says. “When I was approached by Economical in 2016, I said to myself, ‘This is such a unique opportunity in the Canadian marketplace to do something transformational.’ Economical is a Canadian business that has been dedicated to the Canadian market for 148 years. What was unique about the opportunity was the prospect of leading the company through demutualization. Economical’s demutualization is the first time a P&C mutual insurance company in Canada has ever demutualized, so we are making history.”

The road to demutualization
When Saunders joined Economical as president and CEO in November 2016, the plan and process for demutualization had already been determined. His task as the new leader was to take the 148-year-old mutual insurance company – which was very traditional in its methodology, its approach to market and its distribution strategy – and transform it into an innovative and forward-thinking company fit for an IPO.

“This is a story about transformation,” he says. “We set about with two key themes of work. The first was around how we could improve the financial performance of the business and build the right capabilities for a high-performing public company. There was some tough work that had to be done. We have reshaped our portfolio, primarily in commercial lines, by exiting volatile and habitually underperforming lines of business. We have repriced our entire portfolio and modernized the sophistication of our pricing methodologies.

“The second theme is around our transformation agenda. As a mutual company with no shareholders, we have not been paying dividends, and we have been able to accumulate capital over many decades. The board has chosen to strategically deploy that excess capital to modernize Economical and build out new capabilities. I truly believe our industry is on the cusp of fundamental change and a significant amount of digitization. At Economical, we want to be at the front end of that digitization trend.”

Under Saunders’ watch, Economical has made two major transformational investments. One was the launch of Sonnet, a 100% online home and auto insurance company. It marked a big shift away from Economical’s 148-year history as a broker-intermediated business and turned the firm into a multi-channel insurer – something Saunders says “was necessary in order to be a top five P&C player in Canada.”

The second major investment was the introduction of Vyne, a re-engineered broker offering with sophisticated pricing, updated products, and a policy administration and billing solution. Underpinned by Guidewire technology, Vyne is designed to make it easier for brokers to do business by offering faster service and more streamlined contact between the broker, carrier and customer. According to Saunders, Vyne improves administrative efficiency and enables Economical to drastically improve its speed to market, thereby accelerating competitive capacity and adaptability to rapidly changing market conditions. 

The finish line
In preparing for demutualization and an IPO, Economical has unintentionally found itself ahead of the market, which is trending toward difficult remediation decisions in response to hardening conditions. “We have been through our turnaround phase, we have purified our portfolio, we have dealt with habitually underperforming segments, and we are comfortable now with the quality of our portfolio leading into demutualization,” Saunders says.

Still, the question remains: Why go through the process of demutualization when Economical is already one of the leading P&C insurers in Canada, with a clean portfolio, strong financials and an impressive innovation stack?

“Demutualization fulfills our aspirations of being a top-five player in this business,” Saunders says. “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.

“What does demutualization mean for our broker partners? From a trading perspective, it's business as usual. But it does mean we can be more ambitious, and we can expand into new segments. We have just built out a specialty team, which will expand our products into D&O insurance, E&O insurance, energy and excess property. That’s an example of how we can become more relevant to our broker partners, and that will only grow as we become a public company.

“We’ve seen a ton of great momentum, and we’re very excited for the next phase of our journey, which is the completion of demutualization and becoming a public company.”