July 17, 2019

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Tory meddling could cost MPI millions, boost Autopac rates

PC directive extends insurance brokers' contract at rates board members viewed as excessive

The Pallister government has directed Manitoba Public Insurance to give complete control of its future online product sales to insurance brokers, a move that could cost the corporation an extra $23 million over five years and boost Autopac rates, according to documents obtained by the Free Press.

The documents, which include emails, letters, briefing notes and presentations, show repeated interventions by the Progressive Conservative government on behalf of brokers and shed light on why the Tory-appointed MPI board of directors sought a legal opinion last year to clarify its rights and responsibilities.

The documents also reveal that the PC government directed MPI management last fall to extend the corporation's contract with brokers by two years to Feb. 28, 2021 at a remuneration rate MPI viewed as excessive.

MPI had first proposed a less generous package than the brokers had been receiving, and then offered zero per cent increases in the first two years followed by 0.75 per cent in Year 3, mimicking government policy on civil servant and Crown corporation employee pay. The brokers wound up receiving annual increases to their base $84.5 million compensation that are indexed to inflation (the Consumer Price Index, which rose 1.9 per cent in March compared to a year earlier ).

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The Pallister government has directed Manitoba Public Insurance to give complete control of its future online product sales to insurance brokers, a move that could cost the corporation an extra $23 million over five years and boost Autopac rates, according to documents obtained by the Free Press.

The documents, which include emails, letters, briefing notes and presentations, show repeated interventions by the Progressive Conservative government on behalf of brokers and shed light on why the Tory-appointed MPI board of directors sought a legal opinion last year to clarify its rights and responsibilities.

According to documents obtained by the Free Press, the Pallister government has directed MPI to give complete control of its future online product sales to insurance brokers.

PHIL HOSSACK / FREE PRESS FILES

According to documents obtained by the Free Press, the Pallister government has directed MPI to give complete control of its future online product sales to insurance brokers.

The documents also reveal that the PC government directed MPI management last fall to extend the corporation's contract with brokers by two years to Feb. 28, 2021 at a remuneration rate MPI viewed as excessive.

MPI had first proposed a less generous package than the brokers had been receiving, and then offered zero per cent increases in the first two years followed by 0.75 per cent in Year 3, mimicking government policy on civil servant and Crown corporation employee pay. The brokers wound up receiving annual increases to their base $84.5 million compensation that are indexed to inflation (the Consumer Price Index, which rose 1.9 per cent in March compared to a year earlier ).

The documents were obtained through the provincial NDP, which submitted several freedom of information requests following a Free Press story in March that revealed the existence of the legal opinion and the government pressure that led up to it.

Goverment appears to be breaking its own law, Swan says

The Pallister government appears to be violating a law it enacted two years ago by failing to inform the public about its directives to Manitoba Public Insurance, NDP MLA Andrew Swan says.

The Crown Corporations Governance and Accountability Act stipulates that the minister of Crown Services, "in a manner he or she determines as reasonable" inform the public within 30 days of issuing a directive to a Crown corporation.

The Pallister government appears to be violating a law it enacted two years ago by failing to inform the public about its directives to Manitoba Public Insurance, NDP MLA Andrew Swan says.

The Crown Corporations Governance and Accountability Act stipulates that the minister of Crown Services, "in a manner he or she determines as reasonable" inform the public within 30 days of issuing a directive to a Crown corporation.

In introducing the legislation in 2017, the government criticized the former NDP government for interfering in decisions by government-appointed boards of directors, sometimes with negative financial consequences.

When the Progressive Conservative government came to office in 2016, then Crown Services Minister Ron Schuler said: "The political interference in the Crowns has to stop."

The requirement for transparency in the 2017 Act is seen as the "fundamental limitation" on government control over Manitoba Public Insurance, according to a legal opinion provided to the MPI board of directors early this year.

According to documents obtained by the Free Press via the provincial NDP, high-ranking officials with MPI referred in emails to directives received from the Pallister government to grant brokers 100 per cent ownership of online MPI transactions -- when those become available -- and to extend MPI's compensation agreement with brokers by two years.

“It’s only because we’ve asked the question that this has now come to light. It appears to violate their own law,” Swan said Monday.

It appears the directives were issued verbally, as opposed to in writing, but it's clear the corporation got the message.

MPI president and CEO Ben Graham informed his board of a directive respecting online insurance sales and vehicle licensing in a March 11, 2019 email. The email states that "nothing was provided in writing" and he didn't expect it would be mentioned in a forthcoming mandate letter to the corporation from the minister, Colleen Mayer, the following month. It wasn't.

Evidence that government directed MPI to sign a two-year extension with the brokers came in two emails from PC-appointed board member Domenic Grestoni -- one dated Feb. 8, 2019 to then-board chair Brent VanKoughnet, and one dated March 28, 2019 to VanKoughnet and Graham and copied to board chair Michael Sullivan.

In the later email, Grestoni noted that the board obtained a legal opinion on its rights and responsibilities after "the government suddenly and inexplicably 'directed' or instructed (MPI) management to proceed with a two-year extension" in its agreement with brokers.

In a statement to the Free Press late Monday, Mayer denied issuing any directives to MPI regarding its dealings with the Insurance Brokers Association of Manitoba.

"The department has been involved in discussions with both organizations to find a forward-thinking solution for the benefit of all Manitobans for some time," she wrote. "Both MPI and IBAM are encouraged to work together to find a way to provide Manitobans with the services that meet their needs, while understanding the value of professional insurance advice provided by brokers. The two-year extension will allow for sufficient time for MPI and the broker community to work together to define the long-term service delivery strategy.”

– Larry Kusch

They reveal great frustration on the part of MPI president and CEO Ben Graham and PC-appointed board members with what they viewed as government interference in their negotiations with brokers, represented by the Insurance Brokers Association of Manitoba (IBAM).

In a letter dated Nov. 16, 2018 to Crown Services Minister Colleen Mayer, informing her of the contract extension with IBAM, then-MPI board chairman Brent VanKoughnet wrote of his frustrations with the negotiating process and the involvement of government.

"Without a significant change in process we are destined to relive the many communication challenges, misunderstandings and unmet expectations that regrettably erode trust, damage reputations, stifle innovation and limit progress," he wrote.

On Oct. 29, 2018, when negotiations with brokers on a contract were at a critical stage, Graham expressed his frustrations at the government's involvement in an email to then-Crown Services deputy minister Grant Doak, with copies to Mayer and VanKoughnet: "I will no longer have my clarifications changed during a negotiation process as has been done with the brokers a number of times in the past... I should not have my message twisted and interpreted by a number of brokers for them to manipulate words aimed at getting their lofty and unquantified financial objectives adhered to by Government."

"I should not have my message twisted and interpreted by a number of brokers for them to manipulate words aimed at getting their lofty and unquantified financial objectives adhered to by Government." -MPI president and CEO Ben Graham

Later that evening, Graham received an email from his board chair VanKoughnet, telling him that his message to the deputy minister had "a little bit more edge" to it "than I would have preferred." But he said he understood his colleague's frustration at being exposed to "inconsistent directives" from government.

Before signing off, VanKoughnet added, encouragingly, "We will get through this with our self-respect."

VanKoughnet was removed as board chair of MPI by the provincial cabinet on Feb. 13, but he was allowed to remain on the board until his term expired on May 11. He was replaced as chair by Dr. Michael Sullivan, a Portage la Prairie dentist, who was new to the board.

MPI has been looking to introduce online sales for some time, having invested $2.4 million on the initiative, according to a Feb. 8, 2019, government briefing note. The corporation says consumers are demanding the convenience of online transactions, which have the potential to save MPI tens of millions of dollars annually in broker commissions.

Some of the simpler online transactions would include renewing a driver's licence or an auto insurance policy. But brokers have fought hard against any change that would exclude them, and they've had a sympathetic ear in the Pallister government, led by a man who made his fortune in insurance and succession planning.

The savings in broker commissions for MPI could be huge depending on how the system were configured. If brokers were bypassed completely in online sales, the savings could total $237 million over five years, according to a presentation to the MPI board of directors, dated April 18. That would mean a 4.4 per cent reduction in basic Autopac rates.

If online product delivery were shared by brokers and MPI, the savings would be $91 million, according to the presentation by MPI staff. But if all online sales went through brokers — either through a broker website or by customers selecting a designated broker on the MPI site — the corporation would have to pay brokers an additional $23 million over five years (over and above the $84.5 million per year paid to them now), assuming the current compensation structure was retained.

If brokers were bypassed completely in online sales, the savings could total $237 million over five years. If online product delivery were shared by brokers and MPI, the savings would be $91 million. But if all online sales went through brokers, the corporation would have to pay brokers an additional $23 million over five years.

Neither Graham nor Mayer would agree to an interview on Monday.

MPI issued a statement saying it will "continue to evolve its delivery model to meet the needs of our customers."

"MPI acknowledges that online service delivery can supplement the valuable face-to-face interactions with customers. Customers’ needs are the driving factor in establishing an online service delivery strategy including a broker network that is invaluable in being a key distribution channel for MPI products and services. We recognize this is a big change and MPI and IBAM will work in collaboration regarding online services and how they meet the changing needs of Manitobans," the corporation said.

In a statement, Mayer denied that Crown Services issued any directives to MPI.

"The department has been involved in discussions with both organizations to find a forward-thinking solution for the benefit of all Manitobans for some time," she said.

NDP MLA Andrew Swan said it's clear that MPI has been "forced to enter into two agreements which, in their own words 'lack value for money' because they've been forced to do so by the Pallister government."

He said that's not what Manitobans expect from a government that continually promises to give them value for their money.

larry.kusch@freepress.mb.ca

Larry Kusch

Larry Kusch
Legislature Reporter

Larry Kusch didn’t know what he wanted to do with his life until he attended a high school newspaper editor’s workshop in Regina in the summer of 1969 and listened to a university student speak glowingly about the journalism program at Carleton University in Ottawa.

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