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Watchdog fails motorists – MPI premium increases

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30Dec

By: Graham Lane
Published: Winnipeg Sun, December 29, 2016

Despite sound reasons to deny MPI a premium increase for motorists, the Public Utilities Board upped rates 3.7%. Unfortunately legislation, policies, operations and even oversight are all in the hands of government and government-appointed boards, meaning PUB’s oversight mandate is too restricted to be fully useful.

PUB’s late recognition of MPI’s flawed investment strategy and questionable and expensive technology efforts together with a swollen bureaucracy should have been enough for PUB to put pressure on MPI by freezing average premiums. But, provincial legislation gives government absolute control over MPI’s investing and programs, leaving PUB a handicapped and partial review mandate.

A zero rate decision combined with a call for better investing, smarter technology, and a more efficient operation would have been in the public interest. Upping rates simply preserves MPI’s low-performing status quo, allowing the insurer and its government master to idle on, changing little and ignoring valid concerns. With the government itself facing a rising deficit, the bump up in MPI rates helps government’s fiscal position while hurting motorists.

MPI’s investment returns and prospects are too low, and likely to go negative as bond values fall as interest rates rise. MPI and government’s choice of investments overemphasize bonds, provincial and municipal, which generate very low yields. Smarter investing would have more and more diverse equities (stocks). Why is it that government pension plans and the WCB maintain more effective investment portfolios, benefitting government workers (their pensions) and employers (funding WCB), while MPI continues with an out-dated low-yield approach, long to the detriment of vehicle owners? Simple, again because it’s approach serves government’s interests, not motorists.

And then there is the expense side of the insurer’s operations, with layers and layers of management, a personnel complement well above industry norms (even before the addition of driver and vehicle licensing, a government responsibility to MPI’s duties – unprecedented anywhere). Case management is but one element of a long needed independent stringent operational review. MPI carries on resisting extensive benchmarking against private sector and even other provincial government insurers (SGI, ICBC).

Overall, MPI’s financial position is secure: a very conservative estimate of claim liabilities, a ‘pad’ (provision for adverse deviation), plus reinsurance. And, MPI enjoys the ultimate security of a mandatory monopoly with an anticipated infinite lifetime: motorists can’t escape MPI.

Government monopolies commonly empower politicians with hidden tools for cooking the books and buying votes. MPI policyholders have subsidized the provincial government by over $100 million after the first years of transferred responsibility for government’s Driver and Vehicle Licensing branch. Drivers via MPI also pay for government-favoured donations; funding police, Justice and corrections’ operations; paying long-haul truckers’ no-fault claims and training costs with no premiums exacted.

The NDP once pushed it too far when it attempted to have drivers fund university programs through MPI, blinking in the face of public outrage.
MPI shouldn’t have got its latest premium hike. Instead, MPI should be tasked to revise its investment approach and reduce operational costs to at least the industry average. Driver licensing, a core government function, should be unbundled from MPI to improve transparency and remove a hidden subsidy to government.

PUB should have ordered a rate freeze, pressure on MPI is long overdue.

Graham Lane, Manitoba Forward’s leader (manitobaforward.ca) and former PUB chair.

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