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Rewriting the rules | Canadian Insurance
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Rewriting the rules

Rowan Saunders is a busy man. The president and CEO of Economical Insurance is fully immersed in guiding the company through its demutualization, leading up to an initial public offering—a first for a P&C insurer in Canada.

That alone would be enough of a task for most people, but not Saunders. Under his leadership, Economical’s goals extend far beyond becoming a publicly traded company.

“We’re looking at rewriting the rules of underwriting,” Saunders told Canadian Insurance Top Broker, days before heading to Las Vegas to speak at the GuideWire Connections conference in November.

You might wonder where he gets the stamina for speaking engagements on the other side of the continent while simultaneously marching through the demutualization process and overseeing Economical’s business direction—until you hear the boundless energy in his voice.

Saunders is especially excited to talk about a new technology platform for brokers that the insurer plans to launch in June of 2018. The yet-to-be-named digital policy administration system will allow brokers to serve personal lines clients and administer individually rated commercial automobile policies by supplementing broker-inputted data with third-party data.

“Essentially, I look at it as introducing a new Economical to our broker partners. This isn’t just simply putting in a new technology platform—it’s really a new operating model,” he says. “The entire process by which customers, and particularly brokers, interact with us will be changing.”

Although the platform has yet to be launched officially, some of Economical’s broker partners already “have a very intimate understanding of it,” Saunders says. It was developed in consultation with a select group of brokers across the country, and the feedback to date has been promising—to put it mildly.

“The early indication is that they are blown away by what will be coming next year,” Saunders says.

Economical also recently unveiled a major change to its commercial lines structure, creating three regional teams and introducing three core segments: agriculture and transportation, small business and specialty lines. The insurer also welcomed some new senior executives to the team.

$2.2 billion +

Economical’s annualized premium volume

“I think one of the things we’ve been able to do is show innovative leadership,” Saunders says. “There’s a very strong group of talent and leaders in the business.”

Disrupt—or be disrupted

When Economical launched its digital direct arm, Sonnet Insurance, last year, the industry took note. Sonnet turned heads by being the only digital direct in Canada with a full quote-to-bind offering, and won a 2016 GuideWire Innovation award.

“There were a number of things we learned from Sonnet,” Saunders says. “One of the things we learned is that what customers want is something different.”

Although the platform was launched before Saunders joined Economical, he, like the company he now leads, keeps an ear to the ground when it comes to consumer preferences.

“One thing that our industry needs to acutely remember is that customers of other industries are the same customers that we have,” Saunders notes. “When they’ve had a fantastic experience in another industry, that expectation is read across to our industry.

“For example, if someone has shopped on Amazon and had next-day delivery, that’s a very impressive user experience. And when it comes to an insurance transaction, that’s their last point of reference. They’re expecting something similar. To date, as an industry, we’ve been disappointing [them]. But that’s why the investment in technology and understanding customers are critical for brokers and underwriters in the years ahead.”

The key challenge, Saunders notes, lies in standing out in a “sea of sameness.”

“Everyone, I think, is looking for a way to differentiate themselves and to provide additional value to their customers,” he says. “The main message comes down to: Do we really understand our customers, and are we trying hard to disrupt ourselves before others disrupt us?”

When it comes to disruption, Saunders points to the cab industry being upended by Uber as evidence of what can happen when you don’t pay attention to consumer preferences.

“That’s just a great example of an industry that was slow to understand its customers’ needs, and how technology and a different way of thinking can disrupt your business,” he says. “[Uber] effectively wrote the new rules of that game. They don’t own any cars. They have technology that truly empowers the customer. There is no hassle to pay—digging for change or waiting for a receipt.”

“The main message comes down to: Do we really understand our customers, and are we trying hard to disrupt ourselves before others disrupt us?”

For its part, Economical remains committed to working with brokers to ensure they can keep pace with evolving consumer tastes.

“You find some brokers who are incredibly impressive, incredibly innovative, very progressive and actually are doing a really good job,” Saunders says. “There are other brokers who aren’t quite sure about what’s unfolding and what they need to do. Our task is to help them along those lines.”

Preparing for an IPO

Much has been made of Economical’s demutualization. At press time, the process is currently in Phase 3, with two court-appointed policyholder committees—one made up of eligible mutual policyholders and the other, non-mutual policyholders— discussing how to divide the financial benefits of demutualizing.

We decided to cut to the chase: What will demutualization actually mean for brokers?

“That’s a very good question. I know it’s on the mind of many of our brokers,” Saunders says. Then, in a nutshell, he explains that it won’t mean anything.

“If you think about what happens on day one [following demutualization], we’ll continue to operate exactly the way we do [now] with our customers and our brokers,” he says. “Other than that, we will now be a publicly traded company, which will give us more access to capital—which we think will allow us to compete on a level playing field.”

So, what does Economical plan to do with that capital? Invest in its business, for one thing.

“We think that our industry is going through a period of intense change,” Saunders says. “We think those companies that invest wisely, that are innovative and really make the right investments, will be able to pull away from the pack.”

Economical also plans to consider M&A opportunities once it has greater access to capital.

WINNER

Sonnet was the winner of a 2016 GuideWire Innovation Award

“We certainly have a high interest in building our commercial business. We have a very solid commercial portfolio, which is mostly SME. We have a strategy of, firstly, organically expanding that and growing into other segments, but secondly, looking for inorganic opportunities that will help accelerate that process.”

The goal of all this, Saunders says, is to become a major player in the Canadian market.

“You have to decide if you want to be a scale player or a niche player. Our view is that we’re clearly moving along the path to being a scale player,” he says. “We are very focused on becoming a top-five player in the Canadian marketplace.”

To say that Saunders has had his plate full since joining Economical is an understatement. When we spoke to him, he’d just marked a year at the company (“I was joking with my chairman just yesterday, saying, ‘I hope I’m off probation now,’” he quips), and he knows the road ahead to demutualization will continue to present challenges.

“It’s been incredibly demanding, given the huge agenda,” he says. “But it’s really good work, and certainly very rewarding, given the opportunity ahead of us.”

And it’s work that Saunders is confident will pay off in the long run—both for Economical and its broker partners.

“Five years from now, we believe we’ll have achieved our mission of being a top-five insurer. We will have definitely furthered our platform investments, and therefore have a stronger value proposition for our brokers and our customers.”

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Copyright © 2017 Transcontinental Media G.P. This article first appeared in the December 2017 edition of Canadian Insurance Top Broker magazine