Record claims costs drive rate increase: Manitoba Public Insurance

Only second rate increase in last 10 years

A record winter for collision claims ─ combined with an overall increase in collision claims and claims costs─ has resulted in Manitoba Public Insurance asking the Public Utilities Board (PUB) for an overall rate increase of 3.4 per cent.

“More than half of our policy holders will see a rate increase of $20 or less per year or a decrease in their premium,” said Dan Guimond, President and CEO of Manitoba Public Insurance. “Manitoba had a long winter with severe driving conditions, resulting in claims costs jumping 13.5 per cent.”

Of the 3.4 per cent proposed increase, 2.4 per cent will be directed to Basic insurance, while the remaining 1 per cent will be used to help replenish the Rate Stabilization Reserve Fund (RSR), which is used to help cover unexpected cost increases such as those from extreme weather events, explained Guimond.

“The RSR and improved corporate efficiencies have helped avoid passing the full 13.5 per cent on to vehicle owners,” said Guimond. “It’s critical that we replenish the RSR to protect vehicle owners from significant rate increases driven by the next unexpected loss or weather event that would otherwise have to be covered by a significant rate increase. This allows MPI to keep rates stable over the long term.”

The average passenger vehicle premium will be $949 if this application is approved. This rate increase is required to offset ongoing losses in the Basic Autopac plan and replenish the Rate Stabilization Reserve Fund (RSR).

Other factors influenced this year’s rate application, explained Guimond. Compared to last year, net claims incurred increased by $114.6 million. These higher than expected costs contribute to the increase to Basic insurance rates.

“Over the last decade, collision costs have increased 35 per cent overall, while during the same period of time, the Corporation has decreased its rates 14.9 per cent,” said Guimond. “Despite these contrasting financial outcomes, the Corporation was able to decrease, or keep rates flat, for nine of 10 years.”

Additionally, external factors ─ global economic realities, increasingly complex vehicle repairs, and general cost pressures from inflation – have also impacted this year’s rate proposal for Basic insurance.

“It has been well documented just how challenging the past year has been in terms of collision claims and the costs associated with these claims,” said Guimond. “The severe winter driving conditions experienced in the end of the 2013 winter and this past winter overall, along with greater severity of claims, has resulted in significantly higher claims costs.”

Overall, a total of 168,000 collision claims were opened last year with Manitoba Public Insurance, compared to 160,000 the year previous. The average claim collision cost for 2013-14 was about $3,000 ─ a 9.12 per cent increase over the previous year.

If approved, the increase will take effect March 1, 2015. However, because of staggered renewals, some Manitobans will not start paying these rates until they renew their policy after that date. The PUB will rule on the proposed rates this December.

Motorcycle Rates Decreasing

If approved, motorcycle rates (excluding mopeds/small-engine displacement motor scooters) will have decreased 25.6 per cent over the last five years. This year’s rate application is requesting a 6.1 per cent decrease ─ or $61 per vehicle. If approved, the average motorcycle rate will decrease to $939 from $1,000.

Annual report: Four decades of service and stability

Manitoba Public Insurance also filed its 2013 annual report with the Legislature today. The report reflects the Corporation’s history of prudent fiscal management and customer service commitment and demonstrates our continued ability to offer all Manitobans comprehensive coverage at among the lowest rates in the country.

The Corporation’s fiscal performance was affected positively by the investment markets but negatively by increased net claims incurred costs, resulting in a net operating loss of $44.8 million. Despite inflationary increases, claims and operating expenses were $3.2 million or 1.3 per cent less than last year.

Last year, Manitobans filed an average of 1,151 claims daily, and the Corporation paid out $2.6 million every working day. The average cost per claim was about $3,000.

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