On June 30th, 2015, the Department of Finance has published the final regulations for the demutualization of federally-regulated Mutual Property and Casualty (P & C) insurance companies. Economical Insurance, an insurer who is now considering demutualization, will use this framework to convert the company into one with shared capitals. Demutualization is a scary and lengthy process, let us help break it down for you!
Demutualization is a process in which a mutual company, one without shareholders, converts into a share company. In this process, policyholders will be converted into shareholders and regular policyholders.
Economical Insurance opted to go through with demutualization in order to compete with other insurance companies. Mutual companies such as Economical have limited options competing with other companies because of their inability to raise capital. After demutualizing, Economical believes that the new structure will enable them to strengthen finances, acquire other companies, and invest in its business.
Demutualization benefits are the financial outcome of a demutualization process. In the case of an insurance company, these will be shares in the new company. The amount of benefits an individual will receive depends on: demutualization benefit totals, total number of eligible policyholders, and allocation method.
Eligible policyholders will have the opportunity to participate in Economical’s demutualization process. These individuals will have the chance to vote on the final proposal and to receive demutualization benefits at the end of the process. Economical is still debating the criteria of who will qualify as an eligible policyholders but it’s likely that policyholders must hold a policy of Economical and have done so for the 12-month period ending on the date the board decides to proceed with the demutualization process.
Effects on Insurance Coverage, Claim, and Payments of Benefits
The demutualization process will not impact coverage, ongoing claims for insurance benefits, ongoing payments of accident or insurance benefits, or the other terms under your insurance policy.
For more information on Economical’s demutualization, please visit the following website: http://www.getthefacts.economicalinsurance.com. This website will have the most updated information. You may also contact Economical Insurance directly by email at email@example.com or toll free at 1-866-302-6046. Should you have any questions or concerns, please don’t hesitate to contact us!