By: Graham Lane
Published: Winnipeg Sun, November 18, 2016
Despite a valiant effort by the Consumers Association, a mandate-challenged Public Utilities Board readies to grant MPI an unnecessary premium increase before Christmas.
Twenty-ﬁve years ago, a PC government shocked motorists by doing something the then-Minister responsible for MPI had said he would never do: change the monopoly crown insurer’s approach to compensating those injured in motor accidents. Total no fault came into being. The reason for the dramatic switch: fear that court awarded settlements would drive up insurance premiums and upset voters.
Now, a quarter century later, MPI’s questionable investment strategy under the no fault system and a handicapped review mandate for PUB is behind MPI’s application for a 4.3% premium hike. Total no fault is a system that results in a massive investment base and bureaucracy – a claim can continue for a lifetime. The increase sought is unwarranted and should be rejected.
MPI claims its Rate Stabilization Reserve is inadequate and needs to be boosted to protect motorists. Motorists do need to be protected, but from MPI. If MPI’s request is granted, the monopoly insurer’s premium revenues will grow next year by almost double the sought-after rate hike. MPI would get not only a rate boost but also a 3.5% premium revenue jump from more and newer insured vehicles.
MPI’s investment returns have been too low because of MPI and the former NDP government’s choice of investments. MPI relies way too much on bonds, provincial and municipal, which generate very low yields. And, as to the expense side of the insurer’s operations, its claim adjusting practices need a stringent review including benchmarking against private sector as well as other government insurers. Average time on claim is way too high. Whether WCB or MPI, both public monopolies, when the NDP is in power claim cost control fails. As well, MPI’s personnel complement remain bloated.
Overall, MPI’s ﬁnancial position is beyond secure: a very conservative estimate of claim liabilities, a ‘pad’ (provision for adverse deviation) plus reinsurance. Beyond that, MPI enjoys the ultimate security of a mandatory monopoly – motorists can’t escape MPI, ever.
As MPI’s premium revenues rise so does the ‘take’ for the provincial government – by way of cash (premium taxes, registration fees and a chunk of drivers’ licences. Too often through the recently ended 16 years of NDP government, government reached into the pockets of MPI’s policyholders to fund actions and expenses that should have been government’s.
MPI lost well over $100 million in the ﬁrst ﬁve years of the government’s Driver and
Vehicle Licensing branch being transferred to MPI. Likely the beneﬁt gained by the Province continues. If this wasn’t bad enough, policyholders are obliged to provide government-favoured donations; fund police, Justice and corrections’ operations; pay long-haul truckers’ no fault beneﬁts; meet trucking ﬁrms’ training costs; and, cover off other governmental objectives.
Excessive premiums beneﬁt both MPI personnel and government’s summary results, not policyholders. Now, with a new government and board of directors, a clear-eyed review of MPI is needed, one seeking cost reductions, an effective investment approach, and a comprehensive review mandate for PUB.
For now, no premium hike should occur. Enough is enough.
Graham Lane, a retired chartered accountant and former PUB chair, was MPI’s Acting President during turbulent times. He leads Manitoba Forward.
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