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Autopac told to accelerate rate cuts

Regulator orders Crown utility to keep spending under control

Hey there, time traveller!
This article was published 3/12/2011 (2090 days ago), so information in it may no longer be current.

MANITOBA’S Public Utilities Board ordered its largest rate decrease ever Friday when it told Manitoba Public Insurance to drop its overall rates eight per cent next year.

The Crown auto insurer has said it wanted to decrease rates by 6.85 per cent, but the public regulator took it a step further by saying the higher decrease would "instil some fiscal discipline in MPI’s operations."

"Control of costs, including personnel costs, should be a priority for MPI," the PUB said.

"MPI cites service delivery as its focus and makes the argument that if costs are to be restrained, services will be reduced. The board is of the view that both service delivery and cost containment can coexist."

The rate reduction and PUB’s harsh criticism of how MPI runs its business is the latest chapter in a story that began earlier this year when the PUB ordered MPI to refund $336 million to ratepayers in two rebates after an actuarial review found a massive surplus in unpaid injury claims.

The PUB said it suspects "undue level of conservatism" that created the surplus may remain within MPI, which warrants the decrease.

Plus, it said the higher rate decrease will force MPI to pay more attention to upgrading its information technology and reassess staffing costs. The PUB says wage increases are too high when compared with other publicsector unions, which have had to accept a two-year wage freeze.

In particular, MPI’s basic personnel compensation expenses increased by 12.2 per cent in 2010-11 over the prior year. Increases are again projected for 2012 and 2013.

"The board heard a significant volume of evidence with respect to the corporation’s operating expenses at the hearing and accepts that the control and restraint of operating expenses are a significant issue for MPI, given the year-over-year growth observed in recent years," the PUB said in Friday’s written order.

"It is apparent that MPI has not taken significant steps to restrain costs and in fact has not only increased its costs in some areas but plans for further complement increases. MPI’s operating and personnel compensation costs are increasing well in excess of inflation, which causes the board concern, particularly given the restraints being implemented in other areas of public service."

MPI president and CEO Marilyn McLaren said the eight per cent decrease is a small change from its proposed 6.85 per cent decrease.

"It’s one we will be able to implement easily," she said. "I think it’s just another indication of the strength of the Autopac program. We’re good with it."

McLaren also said it’s fair game the PUB is critical of how MPI spends its money.

"We know our expenses have increased faster than inflation the last couple of years, but we know we are spending the money wisely," she said. "We work really hard to make sure Manitobans get the service they expect."

She said MPI has recently brought in three new online centres to improve service and increased its callcentre resources. "We are not in any way, shape or form going to short-change our injury claimants above all else," she added.

CAA-Manitoba spokeswoman Liz Peters said drivers will welcome the higher premium decrease, which takes effect March 1. CAA-Manitoba had called for a nine per reduction.

"We think this is fair for Manitobans," she said. "We’re glad to see the PUB is listening and doing everything they can to keep rates fair."

CAA-Manitoba and the Manitoba branch of the Consumers Association of Canada had also asked the PUB to order MPI to issue another rebate — but the PUB said it wasn’t confident in issuing such an order.

"The large reduction in overall basic rates directed herein will result in a significant reduction to revenues from MPI’s otherwise higher annual premium revenue," the PUB said.

"The board is not prepared to compound that historically large, and presumably ongoing, annual revenue reduction by directing another rebate at this time."

Consumers Association of Canada lawyer Byron Williams said the most important element of the PUB’s 88-page order — it’s available on the PUB’s website — is its concern MPI is not moving aggressively enough to control costs.

"It’s fabulous for consumers," he said.

"The rate decrease is important especially in these tough economic times. It’s also a sharp message to MPI to spend better."


MPI rate decrease — a case study

Using the 2008 Honda Civic (dollars and percentage decrease)

Territory 2011 PUB Ruling % Change
Winnipeg $1,123 $1,036 -7.8%
Commuter $1,197 $1,085 -9.4%
Southern Manitoba $1,053 $973 -7.6%
Central $1,355 $1,209 -10.8%
Northern $1,319 $1,159 -12.1%


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Updated on Saturday, December 3, 2011 at 1:59 PM CST: adds fact box

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