Winnipeg Free Press - PRINT EDITION

MPI's lack of disclosure sign of bigger issue?

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It is hard to believe Dan Guimond, the president of Manitoba Public Insurance, believes what he is saying.

MPI is currently before the Public Utilities Board seeking a 3.4 per cent hike to Autopac rates for 2015. Last week, MPI shocked observers by refusing to answer more than 400 questions-- about 40 per cent of all those posed to the insurer -- that sought information about road-safety programs and use of used parts in repairs.

MPI argued the PUB does not have the legal authority to review these issues because neither has any direct bearing on rates.

Refusing to answer questions posed by a regulator is contemptuous. However, Guimond aggravated the situation with an astonishing claim that this was his way of showing "leadership."

"I have taken the lead to focus the information requests and ultimately the hearing, to that of rates and rate-setting," he wrote. "I believe this is what Manitoba ratepayers expect of Manitoba Public Insurance and its regulator."

Again, it's hard to believe Guimond really believes that.

He surely knows everything MPI does -- from where it buys paperclips to how it invests its reserves -- has an effect on its rates. That means the PUB, which has a broad legislative authority to look at anything that affects MPI's rates, was right to ask those questions.

The PUB serves Manitoba by scrutinizing rate applications. It has a duty to make Crown corporations take the longest, most arduous route to rate hikes. Although a source of frustration to Crowns such as MPI and Manitoba Hydro, it is justifiable as due diligence. Refusing to participate in due diligence, and then claiming it's in the best interest of citizens, is pretty arrogant.

It's also pretty foolish, given there is abundant evidence MPI is fighting a losing battle.

Manitoba Hydro argued for years its export contracts were outside the PUB's purview. This spawned angry debates, court challenges, and in one instance, the issuance of subpoenas for information. In the end, the PUB got the information it wanted, and Hydro got a public relations black eye when it was revealed much of what it was trying to hide was directly relevant to its rate requests.

With that example, why would Guimond and MPI attempt to rebuff the PUB? The answer will be found by looking at the PUB process itself.

Crown utilities and insurance companies have grown to hate the PUB process because it is time-consuming and expensive. As is the case with other regulators, the applicant (in this case MPI) pays the total cost of the hearing, including hiring lawyers and experts for intervenors. When Guimond says he is acting in the best interest of ratepayers, he is arguing a quicker, narrower process is the best way to hold down rates.

MPI claims the hearing process costs $2 million and takes up 2,300 hours of time from corporation staff. That is a lot of time and money, but surely we could agree that in the interests of MPI's credibility, that is time and money well-spent to oversee a government monopoly in auto insurance.

The Manitoba Court of Appeal, in a decision three years ago following a disagreement between MPI and the PUB, certainly endorsed that view. The court did say the PUB is limited to information that relates to basic rates. However, the court also said the PUB could ask for, and receive, almost any information it wants.

That is probably why, during the past two years, the PUB has repeatedly engaged MPI on road safety. The PUB asked the insurer to do a cost-benefit analysis of its road-safety programs, and to consider taking money out of its rate-stabilization reserve to fund infrastructure projects that would increase safety. This is a tried-and-true way that public and private insurers across North America have helped cut down on collisions and injuries, lowering rates in the process.

MPI agreed to proceed on road-safety infrastructure investments in 2013 but the NDP government nixed the plan almost as soon as it was unveiled.

Regardless, this establishes that road-safety initiatives, and their potential to drive down claim costs and rates, are relevant. Claiming now that it's beyond the PUB's scope seems both bizarre and late, to say the least.

It may be hard to believe Guimond and MPI actually believe what they are saying, but we may have to leave open the possibility that's the case. That at the Crown insurer, there are people who think things such as improved safety measures, a critically important element in the insurance industry, are somehow not relevant to its basic rate structure. And further, that despite the PUB's earlier urgings to get engaged on safety, it's suddenly something outside the regulator's scope.

If they do actually believe that, then not answering questions is the least of our problems as far as MPI is concerned.

Republished from the Winnipeg Free Press print edition August 25, 2014 B1


Updated on Tuesday, August 26, 2014 at 8:02 AM CDT: corrects typo in name

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