Frequently Asked Questions (FAQs)

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We will update our questions and answers as events occur.

General questions about demutualization

1. What is demutualization?

   Economical is a mutual company. This means we do not have any shareholders. Instead, we have mutual policyholders. Demutualization is the process where a mutual company converts into a share company. After the demutualization, there will be shareholders and regular policyholders, but no mutual policyholders.

2. What are the benefits of demutualizing?

   Economical believes demutualization will help it compete with other insurance companies, many of which are share companies. Mutual companies have limited options to raise capital for their business and so Economical is limited in its ability to compete with other insurers.

   After demutualization, Economical would be a share company and have more access to the funds it needs to grow. Economical could use these funds to strengthen its finances, acquire other companies or invest in its business.

3. What happens next?

   The next phase of the demutualization process involves negotiations between policyholder committees to determine the allocation of any benefits resulting from demutualization (i.e., how to divide the financial benefits).

   Counsel to represent each eligible policyholder group were appointed on September 22, 2016, policyholder committee members were appointed on February 22, 2017.

   You can subscribe for updates on demutualization, which will include updates on the general progress of negotiations.

   Read more information on the counsel and policyholder appointment process.

Eligibility to participate in demutualization

1. Who are eligible policyholders?

   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 Economical Board of Directors 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 mailed a letter to each eligible policyholder (both mutual and non-mutual). The letter describes the demutualization process and states if the person is an eligible mutual policyholder or an eligible non-mutual policyholder. If you are eligible, you should have received your letter. If you have not received a letter from us and you believe you meet the criteria for being an eligible policyholder, contact us as soon as possible at joininourfuture@economical.com or 1-866-302-6046.

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

   Read more information about eligibility.

2. What are the special circumstances for eligible non-mutual policyholders?

   There are special circumstances where a person who holds a non-mutual policy will be eligible even if they do not meet the eligibility requirements above. 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.
   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.
   3. A 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 (to a maximum of 30 days). A gap in coverage occurs when none of the applicable policies are in force.

3. 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 a person was eligible on December 14, 2015, he or she will be treated as eligible for the remainder of the process, even if they cancel or lapse their 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.

   Economical mailed a notice to eligible policyholders describing the demutualization process and informing them of their eligibility. If you have not received a letter from us and you believe you meet the criteria for being an eligible policyholder, contact us as soon as possible at joininourfuture@economical.com or 1-866-302-6046.

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

4. I have not received a letter yet. Does that mean I am not eligible?

   If you have not received a letter from us and you believe you meet the criteria for being an eligible policyholder, contact us as soon as possible at joininourfuture@economical.com or 1-866-302-6046.

5. How do eligible policyholders participate?

   Eligible policyholders have a significant role in the demutualization process:

   1. They had the opportunity to apply to serve on the policyholder committees that represent eligible mutual and eligible non-mutual policyholders to negotiate and determine the allocation of demutualization benefits (i.e., how to divide the financial benefits).
   2. They have the right to vote for or against the conversion proposal in the final policyholder vote.
   3. They will receive financial benefits (e.g., shares or cash) in accordance with the negotiated allocation and the conversion proposal, if the demutualization is approved.

   You can subscribe for updates on demutualization, to stay up to date on the latest developments.

6. What types of policies are relevant in determining whether a person is eligible?

   All types of policies that Economical Mutual Insurance Company issues are being taken into account in determining eligibility, including auto, property or commercial policies and those sold under the Family Insurance Solutions and Western General brands. This does not include policies issued by our subsidiaries (Perth Insurance Company, Waterloo Insurance Company [also known as Economical Select], The Missisquoi Insurance Company, and Federation Insurance Company of Canada).

Demutualization process

1. What happens in the demutualization process?

   Demutualization is a four-phase process:

   Phase 1: Board decision to proceed with the demutualization process. The Economical Board of Directors initiates the process by passing a formal resolution recommending 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, a formal notice was mailed to eligible policyholders (both mutual and non-mutual). The notice describes the demutualization process and how eligible policyholders participate.

   Phase 3: Policyholder committee negotiation and conversion proposal development. Two policyholder committees are formed: one representing eligible mutual policyholders and one representing eligible non-mutual policyholders. These two committees, with the assistance of court-appointed lawyers, negotiate the method of allocating the financial benefits from demutualization and determine whether any benefits will be provided to persons other than eligible policyholders. That allocation will then be incorporated into the conversion proposal, which Economical will prepare. The conversion proposal contains all of the detailed terms of the company’s demutualization, including the non-allocation aspects of the demutualization. Once complete, the conversion proposal (including the committees’ determination of allocation) will be submitted to the Office of the Superintendent of Financial Institutions (OSFI) for its review, along with required actuarial opinions.

   Phase 4: Second special meeting of eligible mutual policyholders and third special meeting of all eligible policyholders. After OSFI has completed its review of the conversion proposal, there will be a 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. If this vote passes, there will be a third special meeting where all eligible policyholders vote to approve the conversion proposal and to authorize Economical to seek final approval from the federal Minister of Finance.

   After the four phases, the Minister of Finance decides whether to approve the conversion proposal, allowing Economical to demutualize and apply to list our shares on a public stock exchange.

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

2. How are the courts involved in the demutualization process?

   The Ontario Superior Court of Justice will supervise the policyholder committee process, and is responsible for appointing the members of the policyholder committees who will negotiate the allocation of benefits from demutualization, along with two law firms who will assist them in the negotiations. The court made these appointments on September 22, 2016 and February 22, 2017. McCarthy Tetrault LLP was appointed to represent the eligible mutual policyholders and Thornton Grout Finnigan LLP was appointed to represent eligible non-mutual policyholders. Our policyholder committee process page has more details on the committee process and negotiations.

   It is important to note that the court does not decide allocation and cannot force the policyholder committees to agree to an allocation. The court also cannot change the definitions of eligible policyholders. The demutualization regulations define eligible mutual policyholder and eligible non-mutual policyholder and the court cannot change the regulations.

3. When will the policyholder committee negotiations be completed?

   These negotiations will take place over the course of months and may not finish until the end of this year. During that time, there may be infrequent updates on the progress of demutualization. The confidentiality of the committees’ negotiation is protected by court order.

4. What information will Economical provide about the negotiations?

   Economical will provide updates on the general progress of the demutualization process. However, the details of the negotiations and the positions of the parties will be confidential. The negotiation process is subject to strict and mandatory confidentiality. It is governed by a confidentiality order that requires information about the negotiations, including information about the work of the policyholder committees, to be kept confidential. As a result, Economical will not be able to provide any updates on the progress of the negotiations during the course of the negotiations.

   Eligible policyholders will have the opportunity to review the conversion proposal, including the negotiated allocation, before they vote on the approval of the conversion proposal and demutualization.

5. What information will the policyholder committees provide about the negotiations?

   Under court order, the members of the policyholder committees are not permitted to discuss or comment on the negotiations with anyone not directly involved, including with their friends and family.

   This confidentiality is key to the success of the negotiations. It allows each committee the opportunity to consider their positions and the best outcome on behalf of their policyholder class, without the risk of their discussions and strategy becoming public. The regulations and court order were designed with this in mind.

   Eligible policyholders with questions about the negotiation process may contact the law firm that has been appointed to represent their policyholder class. However, please appreciate that the court order for confidentiality also prevents policyholder counsel from sharing information about the negotiations.

6. How were the policyholder committee members selected?

   The court appointed the policyholder committee members on the recommendation of policyholder counsel. There are nine members of the eligible mutual policyholder committee and six members of the eligible non-mutual policyholder committee. More details are available on the policyholder committee process page.

7. What is the company’s role in the policyholder committee negotiations?

   The policyholder committees, with the assistance of policyholder counsel, negotiate and determine the allocation of benefits from demutualization. Economical will provide support and information to the policyholder committees during negotiations, but will not be taking part directly in the negotiations.

   Economical wants the negotiations to succeed and result in an allocation that meets legal and actuarial requirements, and will be approved by regulators and eligible policyholders in the policyholder votes. Economical will assist both committees equally and provide the same information to both. Ultimately, Economical will promote and encourage a fair, efficient and focused negotiation.

8. What happens after the policyholder committee negotiations are completed?

   After the allocation is negotiated, Economical will complete the conversion proposal with information relevant to the negotiated allocation. Once complete, the conversion proposal will be submitted to OSFI for its review, along with required actuarial and expert opinions. The regulations require the conversion proposal to be submitted to OSFI before Feb 22, 2018. Once OSFI’s review is complete, the conversion proposal will be made available to eligible policyholders in advance of the policyholder votes.

Benefits of demutualization

1. Which policyholders are going to get benefits/distributions?

   The benefits of demutualization will be distributed to eligible policyholders and any other person the policyholder committees determine should get benefits.

2. What are demutualization benefits?

   Demutualization benefits are the cash and shares that would be distributed if there is a demutualization of Economical. These cash and shares do not come from the assets of Economical. The shares are newly created during demutualization and the cash would be from selling those shares to investors in an initial public offering (IPO).

3. What amount of demutualization benefits does each policyholder receive? Do all policyholders receive the same amount?

   The amount of benefits individuals receive will depend on various factors including the total amount of benefits to be distributed, the total number of eligible policyholders, as well as the allocation decided by the policyholder committees. At a minimum, it is likely to depend on the length of time a policyholder held a policy with Economical.

   The exact amount of benefits will not be known until demutualization is essentially complete. The benefits will be distributed after our initial public offering.

   Eligible policyholders are encouraged to log in to their demutualization account to stay updated.

Policy changes and impact on insurance coverage, insurance claims, or insurance benefits

1. Who do I contact to make a change to my policy?

   Changing your policy is the same as it was before demutualization. You should contact your broker to discuss any policy changes.

2. How will demutualization affect my insurance coverage, claims, or the payment of benefits?

   The demutualization process does not impact coverage, ongoing claims for insurance benefits, ongoing payments of accident or insurance benefits, or the other terms under your insurance policy.

3. What will happen if I cancel my policy or move to a different insurance company?

   Based on guidance from the Office of the Superintendent of Financial Institutions (OSFI), if a person was eligible on December 14, 2015, he or she will be treated as eligible for the remainder of the demutualization process, even if they cancel or lapse their 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.

General questions about the regulations governing demutualization

1. Where can I find the regulations?

   The regulations are available on the Government of Canada’s website for federal laws.

   There are two sets of regulations, one for insurers with only mutual policyholders and one for insurers with both mutual and non-mutual policyholders. As Economical has both mutual and non-mutual policyholders, the Mutual Property and Casualty Insurance Company with Non-mutual Policyholders Conversion Regulations are relevant to Economical.

2. Why are regulations required in order to demutualize?

   Economical is governed by the Insurance Companies Act and it permits a mutual company like Economical to demutualize, but only if there are regulations that set out the specific requirements for such a demutualization. This means that without regulations, Economical couldn't demutualize.

Other questions

1. I have a question about a legal/tax/estate matter that relates to demutualization.

   Economical does not give advice on legal, tax, or estate issues. We recommend you contact your own advisors to discuss.

Last updated: February 22, 2017

Please note that new questions and answers may be added as more information becomes available.

Should you have additional questions about demutualization, you may call 1-866-302-6046 (toll-free) or 1-514-982-8708 (local/international); or you can submit questions online by clicking on Contact us.