Economical Insurance, legally known as Definity Insurance Company - Comprehensive Analysis Report

Summary

Economical Insurance, legally known as Definity Insurance Company, is a prominent Canadian property and casualty (P&C) insurer with a legacy stretching back to 1871. Founded to provide protection against fire and lightning, the company has expanded significantly across Canada through organic growth and acquisitions. In November 2021, it completed its demutualization and became part of Definity Financial Corporation, which subsequently launched an initial public offering (IPO), making it one of Canada's largest publicly investable P&C insurers.

The company offers a comprehensive suite of insurance products for individuals, families, and businesses, distributed through a national network of licensed brokers. Economical's mission is to be the insurance partner Canadians choose to protect what they value most, driven by a vision to be a top Canadian P&C insurer recognized for business innovation and customer care. Its core values emphasize customer focus, excellence, and collaborative strength. Economical plays a vital role in the economy by providing financial protection against risks, thereby enabling individuals and businesses to mitigate potential losses and contribute to economic growth.

1. Strategic Focus & Objectives

Core Objectives

Economical Insurance's primary business objectives revolve around broadening its market reach and enhancing the experience for both customers and brokers. This is achieved through significant investment in digital innovation and specialized insurance offerings. The company aims for high customer satisfaction, quick response times, and simple claims options, supported by a hassle-free service program guaranteeing repair quality and 24-hour emergency service. Economical also prioritizes cost-effective solutions and offers numerous discount options to help lower premiums.

Specialization Areas

The company specializes in a broad appetite for risk, competitive pricing, and forward-thinking underwriting across its diverse product lines. Key areas of expertise include:

Digital-first Insurance: Leveraging platforms like Sonnet for direct online purchasing and Vyne for streamlining broker workflows.

Commercial Insurance: Targeted offerings for contractors, retailers, professional offices, and specialized business coverage such as oilfield services and winery insurance, with a focus on small businesses.

Broker-Centric Distribution: Maintaining strong relationships with a large network of brokers to provide tailored solutions.

Target Markets

Economical Insurance serves a wide array of market segments across Canada, including:

Individuals and Families: Offering personal auto and home insurance.

Businesses: Providing business property, business liability, commercial vehicle, and surety bonds.

Specialized Commercial Sectors: Targeting specific industries like oilfield services and wineries.

Farm Operations: General, premier dairy, premier poultry, premier cash crop, and winery insurance specifically for agricultural clients.

Its market positioning strategy is built on accessibility through its extensive broker network and direct digital channels, offering reliable, innovative, and tailored insurance solutions.

2. Financial Overview

Funding History

Economical Insurance, now operating as Definity Insurance Company under Definity Financial Corporation, underwent a significant financial transformation with its demutualization in November 2021. This process converted the company from a mutual entity to a stock company, marking it as the first property and casualty insurer in Canada to complete demutualization.

Initial Public Offering (IPO):

Date: Launched on November 9, 2021, and closed on November 23, 2021.

Impact: The IPO transitioned Economical into a publicly traded company under Definity Financial Corporation, making it the second-largest Canadian insurance company investable by Canadians through share purchases. This event enabled a growth and expansion phase, potentially leading to increased investment in innovative products, technology integration, and market expansion.

Financial Indicators:

Gross Written Premiums (2021): $3 billion.

Market Share (December 2012): 4.02% in the Canadian Property & Casualty Insurance market, measured by direct written premium.

Mutual Policyholder's Equity (2014): Approximately $1.6 billion.

The company is recognized for its sound financial decisions, strong underwriting team, and stability within the Canadian insurance market.

3. Product Pipeline

Key Products/Services

Economical Insurance offers a diverse portfolio of insurance products and services catering to various needs:

Personal Auto Insurance

Description: Coverage for personal vehicles.

Features & Benefits: Competitive pricing, discount options, hassle-free service program with repair quality guarantee.

Personal Home Insurance

Description: Coverage for residential properties, including owner-occupied and rental homes.

Features & Benefits: Comprehensive protection against various perils, quick response to needs, simple claims options.

Group Auto and Home Insurance

Description: Tailored insurance solutions for employee or association groups.

Business Property Insurance

Description: Protection for commercial properties and assets.

Business Liability Insurance

Description: Coverage against legal liabilities arising from business operations.

Commercial Vehicle Insurance

Description: Insurance for company fleets and commercial use vehicles.

Surety Bonds

Description: Guarantees for contractual obligations and financial performance.

Oilfield Services Insurance

Description: Specialized coverage for businesses operating in the oil and gas sector.

Winery Insurance

Description: Tailored insurance solutions for wineries, covering unique risks associated with the industry.

Farm Insurance (General, Premier Dairy, Premier Poultry, Premier Cash Crop)

Description: Comprehensive insurance products designed for various types of agricultural operations.

Features & Benefits: Specific coverages to address the unique risks faced by different farming sectors.

Digital Platforms for Product Delivery:

Sonnet Insurance

Description: A direct online insurance purchasing platform.

Development Stage: Fully operational, launched in 2016.

Target Market: Canadians seeking to purchase insurance directly online.

Key Features & Benefits: Real-time analytics, customized quotes, instant policy purchases, online account updates.

Vyne™ Platform

Description: An innovative platform designed to simplify workflow for insurance brokers.

Development Stage: Fully operational, launched in 2018 with subsequent expansion (Vyne Commercial).

Target Market: Insurance brokers within Economical's network.

Key Features & Benefits: Faster service, simplified broker workflows, rapid policy issuance within minutes.

4. Technology & Innovation

Technology Stack

Economical Insurance actively leverages advanced technological platforms and initiatives to drive innovation, enhance operational efficiency, and improve customer and broker experiences.

Sonnet Insurance Platform: This a modern digital insurance platform, underwritten by Sonnet Insurance Company. It utilizes real-time analytics to provide customized quotes, facilitate instant policy purchases, and allow secure online account updates.

Vyne™ Platform: Designed specifically for brokers, Vyne simplifies workflows, accelerates service delivery, and enables rapid policy issuance. The platform has expanded its application with the introduction of Vyne Commercial, targeting the commercial sector.

Strategic Partnerships for Technology Integration: The company shows an openness to integrating advanced insurtech solutions through collaborations, such as its agreement with Swiss Re to utilize its IPA platform. This demonstrates a commitment to leveraging specialized expertise and cutting-edge technology to streamline customer experience and broker workflows.

Focus on Digital Innovation: A strong emphasis on digital platforms underscores Economical's dedication to digital innovation, creating opportunities for further integration of insurtech solutions and complementary digital services to maintain a competitive edge and optimize overall business processes.

5. Leadership & Management

Executive Team

Economical Insurance operates under Definity Financial Corporation. The following individuals held key leadership roles at Economical Insurance previously.

Rowan Saunders - Previous President & CEO of Economical Insurance.

Professional Background: Mr. Saunders emphasized the company's commitment to being a proudly Canadian P&C insurance company with a broker-based business model. He also highlighted strategic initiatives aimed at gaining competitive advantage and the company's journey towards demutualization.

Tom Reikman - SVP and Chief Distribution Officer at Economical Insurance (as of November 2021).

Professional Background: Mr. Reikman made statements in November 2021 regarding Economical's 150-year milestone, highlighting the company's longevity, success, and dedication to customers and communities.

Recent Leadership Changes

As of November 2021, Economical Insurance completed its demutualization and became part of Definity Financial Corporation. This transition likely led to a restructuring of the executive leadership team under the new corporate umbrella, aligning with the operational framework of Definity. While specific new appointments for "Economical Insurance" were not detailed, previous executives like Rowan Saunders and Tom Reikman were noted in the context of Economical Insurance pre-demutualization, or around the time of the transition.

6. Talent and Growth Indicators

Economical Insurance, as a key brand of Definity Financial Corporation, previously reported having over 3,500 employees as of 2021. The company's completion of its public offering in late 2021 signifies a strategic growth and expansion phase. This growth trajectory is expected to involve increased investment in innovative products, additional technological integration, and market expansion efforts.

Historically, Economical Insurance has demonstrated a commitment to fostering an inclusive workplace culture. A 2018 accountability statement indicated that 94% of employees reported their workplace was accepting of individual differences. Employee sentiment recorded in 2019 showed a high satisfaction rate for working at Economical Insurance, with 100% positive reviews from a sample. While specific current hiring trends and open positions for Economical Insurance directly were not detailed, the company's overall expansion phase suggests ongoing recruitment in areas supporting technological advancement, product development, and market penetration.

7. Social Media Presence and Engagement

Economical Insurance maintains a professional presence on social media platforms, particularly focusing on networking sites like LinkedIn. While specific details on extensive activity and engagement across multiple platforms (such as Twitter/X, Facebook, Instagram, YouTube) were not broadly detailed, its presence on LinkedIn typically serves to:

Showcase corporate news and updates.

Highlight professional achievements and company culture.

Engage with industry peers and potential talent.

Reinforce brand messaging and leadership in the Canadian P&C insurance sector.

8. Recognition and Awards

Economical Insurance has consistently received recognition for its financial strength, customer satisfaction, and industry standing.

Customer Satisfaction: The company boasts high customer satisfaction, with 89% in post-claim surveys and 91% of policyholders reporting satisfaction with their service experience in 2018. This is attributed to efficient claims processing and responsiveness to customer needs.

Industry Standing: Recognized as one of Canada's leading property and casualty insurers, serving over a million people. In 2014, it was the 9th largest P&C insurance company in Canada by direct written premium and the 20th largest by total assets.

Financial Strength Rating: Economical Insurance holds an A- (Excellent) financial strength rating from A.M. Best, indicating a strong capacity to meet policyholder obligations.

Community Involvement: The company has historically invested significantly in charitable organizations, previously allocating $1 million annually to community causes. Employees have also actively volunteered, and Economical has partnered with organizations like the Canadian Red Cross, Crime Stoppers, and Parachute to support disaster relief, deliver safety messages, and promote injury prevention programs.

9. Market Analysis

Market Overview

Economical Insurance operates within the Canadian property and casualty (P&C) insurance market, a crucial segment of the broader financial services industry. This sector provides essential financial protection against various future risks, accidents, and uncertainties for both consumers and businesses. It encompasses areas such as auto, home, and commercial insurance. The P&C market plays a vital role in economic stability by enabling individuals and businesses to mitigate potential losses, thereby facilitating economic activity and growth.

Market Dynamics and Trends:

Economic Influences: Global economic factors, including inflation or recessions, can significantly impact the P&C insurance landscape. These pressures often lead to increased claim frequency and severity, influencing insurer profitability and necessitating adjustments in premium rates and underwriting strategies.

Evolving Consumer Priorities: Insurers must adapt their product offerings to align with changing consumer demands during economic shifts.

Regulatory Environment: The P&C insurance industry is highly regulated, making regulatory changes and compliance critical considerations. Non-compliance can result in financial penalties or reputational damage.

Transformative Trends: The market is continuously shaped by emerging technologies and evolving risks. Climate change, geopolitical tensions, and advancements in artificial intelligence are creating new risk landscapes