Learn About Demutualization


What is demutualization?

Demutualization is when a mutual company - like Economical - converts to a share company.

Right now, Economical is a mutual company. Unlike most companies which are share companies, mutual companies do not have shareholders who own shares of the company. Demutualization is the process where a mutual company converts into a company with shareholders. We will continue to provide home and auto insurance for personal and business needs, but after demutualization we will no longer have mutual policyholders and our shareholders will have governance rights.

We're proud of our rich history and are deeply rooted in the communities we serve. And while we stand strong, we never stand still. We're excited at the prospect of becoming the first Canadian P&C insurance company to demutualize. This is an opportunity for our policyholders to join in our future.






What is the process for demutualizing?

The process to demutualize is set out in regulations published by the federal Department of Finance. Here are the highlights of the four phase process:

Phase 1
BOARD DECISION TO PROCEED WITH THE DEMUTUALIZATION PROCESS

The Economical Board of Directors must pass a formal resolution to recommend demutualization. This phase is complete. The board passed this resolution on November 3, 2015.


Phase 2
FIRST SPECIAL MEETING OF ELIGIBLE MUTUAL POLICYHOLDERS

After the board resolution, there must be a meeting of eligible mutual policyholders to vote on whether to move to the next phase of the demutualization or terminate the process. On December 14, 2015, the eligible mutual policyholders of Economical voted to move to the next phase — negotiations over how to divide up (or “allocate”) the benefits from demutualization. As a result of this vote, there was a mailing of a formal notice to eligible policyholders (both mutual and non-mutual). The notice described the demutualization process and how eligible policyholders can participate.


Phase 3
POLICYHOLDER COMMITTEE NEGOTIATION AND CONVERSION PROPOSAL DEVELOPMENT

Economical does not decide on the allocation of financial benefits from demutualization. Instead, two policyholder committees representing eligible mutual and eligible non-mutual policyholders will negotiate and decide on the allocation. These committees are made of eligible policyholders who are appointed by the court and are assisted by court-appointed lawyers. Review our Policyholder Committee Process page for more information.

While the committees negotiate, Economical will prepare the rest of the conversion proposal. Once complete, the conversion proposal (including the committees’ determination of allocation) will be submitted to Office of the Superintendent of Financial Institutions (OSFI) for its review, along with required actuarial opinions.


Phase 4a
SECOND SPECIAL MEETING OF ELIGIBLE MUTUAL POLICYHOLDERS

After OSFI has completed its review of the conversion proposal, there will be second meeting of eligible mutual policyholders. The eligible mutual policyholders will vote on changes to Economical bylaws in order to permit eligible non-mutual policyholders to vote at the third special policyholder meeting. These bylaw changes are necessary because demutualization can only occur if there is a vote to approve the conversion proposal that includes eligible non-mutual policyholders.

In advance of the vote, the eligible mutual policyholders are sent the conversion proposal along with other information about the vote.


Phase 4b
THIRD SPECIAL MEETING OF ALL ELIGIBLE POLICYHOLDERS

The third vote is by all eligible policyholders (both mutual and non-mutual) to approve the conversion proposal and to authorize the company to seek final approval of demutualization from the federal Minister of Finance.

After the four phases, the Minister of Finance decides whether to approve the conversion proposal and demutualization. Once the Minister approves and issues letters patent of conversion, Economical will begin the IPO process.

If any of the above policyholder votes do not pass, the demutualization process ends. The Economical board of directors can also stop the demutualization process at any time before final approval from the Minister of Finance.


Here is a more detailed description of the four phase process of demutualization.

To read the regulations in full, visit the Government of Canada’s website for federal laws. The regulations are called Mutual Property and Casualty Insurance Company with Non-mutual Policyholders Conversion Regulations.




Am I eligible?

Eligibility depends on holding policies of Economical Mutual Insurance Company (including those sold by Family Insurance Solutions and Western General). Policies issued by Perth Insurance, Waterloo Insurance (Economical Select), Federation Insurance or Missisquoi Insurance (Economical in Quebec) are not taken into account.

There are two types of eligible policyholders: eligible mutual policyholders and eligible non-mutual policyholders.

  • An eligible mutual policyholder is a person who holds an Economical mutual policy if he or she held it on November 3, 2015 (the date the board decided to proceed with demutualization).
  • An eligible non-mutual policyholder is a person who holds an Economical non-mutual policy and has done so for the 12-month period ending on November 3, 2015, or meets the special circumstances defined below.

Economical sent a letter to each eligible policyholder that describes the demutualization process and states if the person is an eligible mutual policyholder or an eligible non-mutual policyholder.

If you have already received a letter from us, you can log in and set up your demutualization account.

What are the special circumstances to be an eligible non-mutual policyholder?

There are special circumstances where a person who holds a non-mutual policy will be eligible. These circumstances are fixed and cannot be changed or expanded.

  1. A person added to a policy that was already in force for at least 12 months

    A policyholder can be eligible even if they did not hold their policy for the entire 12-month period, so long as the policy they held on November 3, 2015 was at least 12-months old at the time.

    Example (illustration only): sometime during the year from November 4, 2014 to November 3, 2015, you bought a house with another person. The other person has had an existing Economical home policy for many years and you were added as a joint policyholder and held the policy on November 3, 2015. You and that other person are jointly eligible under this policy.

  2. A person who changed Economical policies part way through the 12-month period, so long as they changed to a "similar" policy

    A policyholder can be eligible even if they changed Economical policies during the 12-month period before November 3, 2015, so long as they held two or more "similar" Economical policies during that 12-month period which added up to 12 months of coverage.

    A policy is "similar" to another policy if both policies are personal property policies, both policies are auto policies or both policies are commercial property policies.

    Example (illustration only): you insured your house with Economical for years. Sometime during the year from November 4, 2014 to November 3, 2015 you moved to a different province and Economical replaced your existing policy with a new policy for the new home.

  3. 12-month policyholder with small gaps in coverage

    A policyholder can be eligible (including in the above circumstances) even if there are small gaps in coverage (max. 30 days). A gap in coverage occurs when none of the applicable policies are in force.

    Example (illustration only): you have insured your business with Economical for a few years. However, you were a little late with your renewal and as a result there was a small gap in coverage (less than 30 days).

Do I have to continue to hold an in force policy to remain eligible?

Based on guidance from the Office of the Superintendent of Financial Institutions (OSFI), if you were eligible on December 14, 2015, you will be treated as eligible for the remainder of the process, even if you cancel or lapse your policy after that date.

Eligible policyholders should be aware, however, that it is possible the demutualization process may become subject to legal challenges, which may include challenges to how eligibility is determined. Accordingly, eligible policyholders should consider holding their policy or policies throughout the process as it will ensure eligibility under demutualization for any benefits distribution.

Read more information about eligibility.

If you have questions or concerns about how eligibility applies to you, please contact us.






Why are you demutualizing?

What's in it for Economical?

It is our vision to be a leading property and casualty insurance company in Canada. To do that, we need to better compete with other insurance companies, many of which are share companies. After demutualization, as a share company, we will have more access to the capital that will allow us to make strategic acquisitions, investments in the business, and strengthen our financial position and flexibility.

What's in it for me?

Eligible Economical policyholders
Eligible policyholders have the unique chance to participate in the conversion of Economical to a public share company after 145 years as a mutual company. As part of this, you may receive cash or shares in Economical.

Shareholders are usually entitled, among other things, to vote at meetings of shareholders and to receive dividends on their shares as declared by the board of directors. Shares can also be sold to investors, for example in an initial public offering, for cash.

The details about the distribution and value of Economical shares won't be known until much later in the process.

Brokers
Demutualizing is a key strategy in fulfilling our vision of becoming a leading Canadian P&C insurance company. We're a strong, stable business that provides choice and dependable claims service to your customers. Successfully fulfilling our vision will enable us to remain a longstanding business partner.

Employees
For 145 years, Economical has been a strong Canadian business, providing rewarding career opportunities in the P&C insurance industry. Demutualization is a key strategy to achieve our vision of becoming a leading insurance company. Realizing this vision will enable us to stand the test of time and continue to be a great place to work.

Community members
Economical began in 1871 as a group of "neighbours helping neighbours" and has remained committed to being a responsible, reliable corporate citizen. Demutualizing is a key strategy in fulfilling our vision of becoming a leading Canadian insurance company. Realizing this vision will help us continue our legacy and be there for policyholders and our community members when they need us most in the years ahead. Our community giving program has grown steadily and contributes over a million dollars annually to charitable causes, scholarships, and bursaries. With the help of our employees, we've donated thousands of volunteer hours in the communities where we do business.

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