Economical Insurance eliminated 143 positions in its offices throughout Canada last month as part of its business transformation program.
The reductions on May 29 represent 6.2% of the company’s total workforce.
“The lion’s share was in the Waterloo region, where there were 104 separations,” said Karen Gavan, president and CEO of Economical. “The majority of the reductions were in IT, with the balance coming from underwriting operations.”
The reductions are in addition to 145 positions that were eliminated in 14 Economical offices across the country in October 2012.
“Our IT department has streamlined its processes to deliver our IT capabilities more cost effectively, which today requires significantly fewer staff,” Gavan told Insurance Business. “The reductions in underwriting stem from the elimination of operational actions that were no longer adding value, a direct result of efficiencies gained through our business transformation initiative.”
Several brokers, who did not want to be named, told Insurance Business that it remained “too soon to tell” what the upside of the company’s streamlining process may be for brokers in the future, since many of the layoffs were related to the restructuring of the company’s IT section.
Privately, brokers expressed concern that the layoffs have introduced an element of uncertainty and inconsistency in their business relationships with company personnel. “I think when anybody goes through a re-org, those concerns are valid,” said one broker.
“Our brokers understand and are supportive of the steps we are taking to improve our competitiveness,” Gavan responded, when asked what kind of reaction the company has heard from brokers about the restructuring. “We are on a multi-year journey that will make our processes more efficient and make it easier for our broker partners to do business with us.”
The potential duration of the uncertainty is also of interest to brokers. They observed that the company’s reorganization is one element of a business strategy geared towards operational excellence – a key ingredient in the company’s preparation for the possibility of a future demutualization.
Economical’s mutual policyholders voted two years ago to proceed with the demutualization of the company. The company has proposed to demutualize in one of two ways: either the company would undertake an initial public offering (IPO), or it could proceed by way of the sale of some parts or all of the company.
But the federal government has yet to deliver on its stated intention to come up with regulations that will allow the demutualization of property and casualty insurers. The government has stated that they will not allow companies to demutualize without the new regulations.
In the meantime, Economical said the first improvements in its underwriting operations are just being rolled out.
“To ensure we are aligned with our broker partners’ expectations, we are engaging them through broker advisory groups to get their input and guidance along the way,” Gavan said. “Through our transformation, Economical will be an even stronger independent market for our brokers to do business with for the long term.”
