The language is complex and technical, the issue mind-numbingly arcane. But the importance of the Public Utility Board's most recent decision on Autopac Rates -- and attempts by the government to unilaterally change key operating standards at Manitoba Public Insurance -- could not be more dramatic.
The PUB on Wednesday approved a 0.6 per cent Autopac rate reduction, just as MPI had asked.
However, the regulator also delivered a stern slap on the wrist of the Progressive Conservative government for illegally interfering in issues related to MPI operations and basic insurance rates.
Specifically, the PUB's order serves as a strongly worded rebuke to Premier Brian Pallister and his cabinet to keep their mitts off MPI issues that are, by law, clearly within the purview of the provincial regulator.
The PUB's order serves as a strongly worded rebuke to Premier Brian Pallister and his cabinet to keep their mitts off MPI issues that are, by law, clearly within the purview of the provincial regulator.
The scolding aimed at Pallister came as a result of a motion filed by the Consumers Association of Canada, which objected when cabinet passed a regulation to allow MPI to establish higher financial reserves to cushion future rate increases. The CAC was concerned the higher reserve target would require MPI to double the size of the reserve accounts and thus trigger increases in Autopac rates while eliminating future rebates.
The CAC argued that taken together, three pieces of provincial law -- the PUB Act, the Manitoba Public Insurance Act and the Crown Corporations Governance and Accountability Act -- strictly forbid cabinet (otherwise known as the Lieutenant Governor in Council or LGIC) from interfering in any issue related to Autopac rates.
The PUB determined the LGIC is "subordinate to the Board in the Basic rate approval process." Further, it was found that the regulation in question was "inconsistent and in conflict with the Board's rate approval mandate" and "unenforceable."
Bryon Williams, a lawyer with the Public Interest Law Centre and counsel for CAC, said the decision clearly establishes the line between the political arm of government and the provincial regulator when it comes to setting Autopac rates.
"It is an important re-affirmation of the independence of the rate-setting process," he said.
The CAC also raised concerns about the role of private brokers in Autopac services. The Pallister government intervened and directed MPI to continue working with private brokers on the sale and renewal of Autopac policies.
MPI had served notice that it wanted to offer most of its services online, a move that would cut brokers out of basic Autopac services and save the Crown insurer tens of millions of dollars per year in commissions now paid out to brokers.
Currently, MPI and the Insurance Brokers Association of Manitoba are engaged in a conciliation imposed by cabinet directive. The PUB said it would not offer an opinion about whether the commissions paid to brokers were fair or reasonable because of the conciliation. It promised to review the "cost consequences" at a later date.
In a stroke of irony, the PUB did agree to a two-year pilot to test the impact of higher reserve account levels. MPI has offered to use money from its "extension" services -- additional insurance that goes above and beyond basic Autopac coverage -- to grow the reserves. That means it is unlikely that basic Autopac rates would have to be bumped up just to help restore reserve accounts.
This compromise clearly establishes that the original cabinet regulation was overkill. Despite the fact that the regulator and MPI have sparred on this issue for some years, in the end the PUB was not intransigent; a cabinet order was unnecessary.
Despite the fact that the regulator and MPI have sparred on this issue for some years, in the end the PUB was not intransigent; a cabinet order was unnecessary.
It is also politically risky because it has, once again, put the Pallister government on the defensive after having been caught, once again, improperly manipulating the operations of a Crown corporation.
Pallister in particular continues to steer himself into harm's way on this file. A former private insurance broker, Pallister has raged at any suggestion his government's interference in Autopac is designed to help an industry with which he is closely associated.
Pallister maintains that his insurance brokerage, which continues to have an active licence despite his role as first minister, never sold Autopac products and thus cannot be in a conflict of interest. Pallister's argument ignores the fact that, regardless of the motivations, his government has twice interfered in matters that should be decided between MPI and the PUB.
In that context, the PUB's decision to defer judgment on the private brokers issue means that there may be more pain ahead for the Pallister government on this issue.
In its decision this week, the PUB noted it does not have the power to direct MPI on any contracts or agreements it enters into. However, the regulator is allowed to consider the cost implications of any aspect of MPI operations.
Now that the CAC has raised official concerns about the cost of broker commissions, it is unlikely the PUB will back off its promise to scrutinize any deal that comes about as a result of conciliation.
The Pallister government has been caught ‐ and rebuked ‐ once for putting its hand into the Autopac cookie jar. There is no reason to believe the PUB won't do the same thing when it comes to the deference Pallister has shown to private brokers.
In the past, the PUB has looked favorably on the role of brokers, which served as the retail network that supports Autopac.
However, in internal documents obtained by the Free Press, the details of which were published earlier this year, MPI made a compelling argument that offering Autopac through its own online portal would save $237 million over five years, a sum equivalent to a 4.4-per-cent rate cut.
The Pallister government has been caught -- and rebuked -- once for putting its hand into the Autopac cookie jar. There is no reason to believe the PUB won't do the same thing when it comes to the deference Pallister has shown to private brokers.
Born and raised in and around Toronto, Dan Lett came to Winnipeg in 1986, less than a year out of journalism school with a lifelong dream to be a newspaper reporter.
Updated on Wednesday, December 4, 2019 at 10:07 PM CST: Updates story.