Canadian Underwriter

Manitoba government-run auto insurer to increase overall rates in 2014

December 17, 2013   by Canadian Underwriter

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Manitoba’s Public Utilities Board announced Monday it has approved an “overall” rate increase, of 0.9%, for compulsory auto insurance premiums in the provinces, while expressing concerns about operating expenses at Manitoba Public Insurance.

The 0.9% premium increase would take effect March 1 “for all major classes combined,” PUB stated in a press release.

In addition to utilities such as electrical and water, PUB also regulates the auto insurance premiums charged by MPI, the government-run monopoly. Vehicle owners in Manitoba must purchase MPI’s Basic Autopac coverage, which includes third-party liability, collision, upset and comprehensive.

Last June, MPI announced it had asked for an increase, to its Basic Autopac rates, of 1.8% for the 2014/15 insurance year. Overall, MPI stated at the time, rates decreased by 4% in 2011, 8% in 2012 and “remained stable” this year.

The overall 0.9% increase in rates approved to take effect next March will translate into rate increases or reductions, depending on class. For example, private passenger rates will increase by 0.9%, commercial will drop by 1.6%, the motorcycle class will drop by 6.1%, trailers will increase by 6.1% and off-road vehicle rates will drop overall by 12.5%.

PUB “continues to have significant concerns about” MPI’s operating expenses, PUB stated in Monday’s press release, adding MPI “must control its expenses.” PUB added it has directed MPI to review staffing levels and cost control.

“MPI is to file a benchmarking framework along with benchmark indicators to which the Corporation intends to be accountable,” PUB added.

PUB also ordered MPI to “provide a review of Road Safety expenditures to maximize the value to ratepayers.”

“MPI is also to provide details of what steps it has taken, or intends to take, to improve or enhance the services and products being offered to Basic ratepayers,” PUB announced. “MPI shall have the composition of its investment portfolio reviewed by an external expert  consultant with a view to determining whether the current asset mix should continue or be revised.”

In October, MPI reported a profit of $41.9 million for the first six months of 2012.

“MPI is committed to rate stability for Manitoba drivers,” MPI stated earlier. “For 14 of the last 15 years, the Corporation has either held the line, or reduced rates. This has resulted in a cumulative, total rate decrease of 17.8 per cent for Manitoba vehicle owners.”

IBC notes on its website that in Manitoba’s government-run no-fault system, an accident victim who is catastrophically injured has no right to sue for economic loss “that exceeds MPI’s prescribed schedule of payments.”

The government-run insurer in British Columbia — Insurance Corporation of British Columbia (ICBC) –asked B.C. Utilities Commission board earlier this year for permission to increase basic auto rates by 4.9%. In September, BCUC approved an interim refundable 4.9% increase to basic rates — meaning the rates increases are subject to a refund, with interest — depending on the permanent rate increase, which BCUC has yet to approve.

In October, BCUC had asked ICBC to provide more detail on its claims handling, what ICBC’s claims initiatives entail, when exactly they began and when they ended.

BCUC also questioned whether an increase in basic rates would be sufficient to meet the minimum capital test (MCT) mandated by the federal government.

Meanwhile, in Ontario — where auto insurance is provided by the private sector — the province announced last August it would require auto insurers, when filing rate applications, to “propose rates and a risk classification system that contribute adequately to the achievement of” a goal to reduce private passenger auto premiums by 15% over two years.

Ontario law requires auto insurers in the province to submit proposed rate changes – along with supporting actuarial data – to the Financial Services Commission of Ontario (FSCO) for approval. FSCO and its actuaries then review the data and insurers’ assumptions regarding claims costs, expenses and investment income to ensure that the proposed rates are not excessive but are also not going to impair the carrier’s long-term solvency.