Manitoba Public Insurance is applying to the Public Utilities Board to streamline the hearing process when there is no substantive change in insurance rates, bringing its process in line with that of electricity, natural gas distribution and local telephone services.

The proposed rule changes are also designed to provide consumers with even more rate transparency than the current system.

For several years, Manitoba Hydro and Centra Gas have filed multi-year rate applications with the PUB that recommend rate changes for each of the years applied for. Similarly, rates of Manitoba Telecom Services are determined for a multi-year term through a price cap regime established by the CRTC.

Multi-year applications were contemplated and provided for when the provincial legislature established the corporation’s regulatory rate-setting regime. The Crown Corporations Public Review and Accountability Act states:

“A corporation may submit for the approval of the Public Utilities Board, pursuant to this Part, proposals regarding rates for services relating to a period of not more than three years and the board shall identify in its order the change approved, if any, with respect to each year.” Sec. 27(1) Crown Corporations Public Review and Accountability Act.

The same legislation allows the PUB and any intervener to call for a review and modify an approved multi-year application if it is satisfied that the financial situation has substantially changed.

The primary reasons for the multi-year application

• Consistent Rate-Setting Methodology – Manitoba Public Insurance uses an actuarially sound rate-making methodology that was primarily developed in the early 1990s. These principles have been applied consistently over time and the major elements have remained virtually unchanged for the past 12 years, even through the PUB process.
  
  This application applies all the same disciplines used in previous general rate applications including:
  • The process for calculating use/territory experience adjustments
  • Conventions for CLEAR and rate-line adjustments
  • Classification offset principles
  • Capping rules

Manitoba Public Insurance is proposing to continue to annually update its financial forecast and rate-making procedures with emerging claims and financial information. It is proposing rules to the PUB that will allow adjustments to be made without the need for hearings. All these rules and procedures have been used by Manitoba Public Insurance and approved by the PUB for the last 12 years.

• Financial Stability – Manitobans have benefited from a strong Manitoba Public Insurance. Over the last six years the corporation has returned nearly $250 million to ratepayers, primarily because of strong investment returns. The corporation expects revenue and costs to remain steady over the next five years. Investment income is expected to continue to be above $100 million annually and the corporation will return any surpluses to consumers according to a PUB-ordered methodology.
  
  
• Rate Stability – Since 1998 there have been five rate decreases, two increases and three years where the corporation held the line on auto insurance rates. The outcome has been a decade of rate stability that is unmatched in Canada. The corporation’s multi-year rate application would extend this stability to 13 years with no increase in revenues through to 2011.
  
  
• Reduced Costs to Manitobans – The annual filing, subsequent information requests and hearings consume up to 2,700 hours of internal staff time and about $1 million in associated costs each year. These expenses include paying for PUB accounting, actuarial and legal costs, intervener costs and the costs of their witnesses, as well as advertising, printing, transcripts and PUB operations fees.
  
  Moving to a three-year rate application will save about $1.4 million over the application’s life time. Internal staff time will be reduced to about 200 hours a year, saving 5,000 hours over two years.
  
  
• Rate Stabilization Reserve Surplus – The PUB has ordered a maximum Rate Stabilization Reserve (RSR) range for basic Autopac of $105 million with annual growth adjustments tied to written premium. The corporation has agreed to provide rebates to Manitobans when the RSR level is above this maximum.