MANITOBA PUBLIC INSURANCE

Transcription

1 MANITOBA PUBLIC INSURANCE SM.5 PUB ORDERS, RECOMMENDATIONS & UNDERTAKINGS SM.5.1 Wildlife Loss Allocation In Order 122/10, the Public Utilities Board ordered that: The loss attribution rules provided in Board Order 97/05 for single vehicle accidents involving pedestrians and cyclists are hereby amended to include wildlife/livestock-related accidents, and the change in allocation shall affect premiums for major classes for 2011/12; The loss attribution rules for accidents involving pedestrians and cyclists have been amended to include wildlife/livestock related accidents. Further details can be found in Section 3 of TI.19 Basic Program Rate Making Methodology. SM.5.2 King Street Property Donation In Order 122/10, the Public Utilities Board ordered that The cost of the King Street property donation ($1.1 million) shall not be allocated to Basic for the purposes of rate-setting; The transfer of ownership to the King Street property closed March 8, The Corporation confirms that the cost of the property donation was not part of forecasts for basic rate-setting. The total cost, as reflected on the 2011/12 financial statements, will be $83,000 which represents the amount of book value at the time of sale. SM.5.3 Inter-Provincial Trucking PIPP Costs In Order 122/10, the Public Utilities Board ordered that MPI shall allocate PIPP costs associated with claims by inter-provincial truckers to a non-basic line of business; On January 7, 2011, the Corporation filed an application with the Board pursuant to subsection 44(3) of The Public Utilities Board Act, to review and vary two aspects of the Order, one being that the Board exceeded its jurisdiction by ordering that PIPP Page 1

2 costs (Personal Injury Protection Plan, no fault accident benefits) associated with claims by extra-provincial truckers and bus drivers be allocated by the Corporation to a non-basic line of business. The Review and Vary application was denied in Board Order 44/11. These costs remain in the forecast based on the Corporation s request to the PUB to suspend this aspect of Orders 122/10, 145/10 and 44/11. This request was stated in the letter to the Public Utilities Board, dated June 3, SM.5.4 Stochastic Modeling In Order 122/10, the Public Utilities Board ordered that MPI shall utilize stochastic modeling of claims incurred for rate-setting purposes; Stochastic modeling of claims incurred has been performed. Further information can be found in TI.17 Claims Forecast Data Book. SM 5.5 Asset and Liability Allocation In PUB Order 122/10, the Public Utilities Board ordered that the proposed revised asset and liability allocation methodology be employed for the next GRA. The Corporation confirms that the revised asset and liability allocation methodology has been utilized for this General Rate Application. The investment allocations are shown in AI.9. SM.5.6 Road Safety Vision In Order 145/10, the Public Utilities Board ordered that: MPI provide a report to PUB, with copies to the interveners, ahead of next year s filing of its GRA, as to the development of the Corporation s vision with respect to road safety, and that the report should be fled no later than May 31, 2011: The Corporation responded to this order on May 30, A copy of the response is Page 2

3 found in AI.10 Part 1 Road Safety Vision. SM.5.7 Inter-Provincial Truckers In Order 145/10, the Public Utilities Board ordered that MPI provide, in its next GRA filing, the following evidence with respect to inter-provincial truckers: i. The current parameters, details and implications of the Basic program with respect to extra-provincial commercial and public trucks and buses; ii. How many of these vehicles are plated in Manitoba but not insured under the Basic program; iii. How many inter-provincial truck drivers have been provided with actual PIPP benefits since PIPP came into place; iv. How many of those drivers are or were associated with interprovincial trucks plated in Manitoba; v. What have been the costs of PIPP claims filed with respect to non-manitobans injured in collisions involving exempt Basic vehicles; vi. Whether, when PIPP was enacted the costs implications for Basic were contemplated and/or forecast; and vii. How, if at all, this information is reflected in MPI s publications as provided to policyholders. Response: i. Trucks registered to operate beyond 161 kilometres outside the borders of Manitoba are excluded from Third Party Liability and All Perils Coverage under Basic Autopac but their occupants eligibility for benefits from the injury program (PIPP) is not affected. ii. There are currently 9,281 Manitoba plated long-haul trucks and 79 Manitoba plated public service vehicle (PSV) buses that travel more than 161 km outside of Manitoba and that are not insured for physical damage or third party liability under the Basic program. Drivers and passengers are insured for PIPP Page 3

4 coverage, according to the Act, depending on residency and location of the collision that led to the injuries. Public service vehicle buses pay a flat rate for PIPP coverage. iii. Any non-manitoba resident (driver or passenger) travelling through Manitoba with a non-manitoba plated vehicle and who is involved in a motor vehicle accident in Manitoba is entitled to PIPP benefits in accordance with any agreement between the Corporation and a government or agency of the non-resident s home jurisdiction or if no agreement exists, to the extent the driver is not responsible for the accident. The number of claims involving inter-provincial truck drivers that have been provided with benefits since PIPP came into force cannot be derived from claims data involving non-manitoba plated vehicles. Interprovincial truck drivers of Manitoba plated vehicles can be determined - see response to iv. iv. With respect to drivers that are or were associated with interprovincial trucks plated in Manitoba, there were 409 PIPP claims from 1994 to 2010 for an average of 24 PIPP claims per year. v. The total costs of PIPP claims filed with respect to non- Manitobans injured in collisions involving exempt Basic vehicles from the period (Manitoba Public Insurance started recording CARS party information in databases in the fall of 1999) is $825,406 on 20 claims. vi. When PIPP was enacted, the overall cost implications of all noncontributing parties including pedestrians, bicyclists, passengers and non-residents were considered. In 1994 when PIPP was enacted, truck owners paid a flat premium for PIPP benefit costs, as bus owners do today. vii. Information about the benefits of the Personal Injury Protection Plan (PIPP) is easily accessible to both Manitobans and nonresidents at the website A policy guide that includes information about the benefits of PIPP is also available for pickup at any Manitoba Public Insurance Service Centre or Page 4

5 broker location. This information explains how PIPP coverage applies to Manitoba residents travelling in Canada or the USA and how PIPP may apply to non-residents involved in an accident in Manitoba with an out-of-province registered vehicle. Manitoba Public Insurance publishes its annual and quarterly financial reports on-line at which is available to both Manitobans and non-manitobans. This information includes total claims costs related to bodily injury claims; claims costs for any specific group, such as interprovincial truckers, are not broken out separately. SM.5.8 Territories In Order 145/10, the Public Utilities Board ordered that: MPI file (in next year s GRA) an analysis of the effects and implications of employing one territory, together with the pros and cons of that approach: As per SM.1.2 of the 2012 Rate Application, the Corporation remains committed to using rating approaches that are based on actuarial principles. This approach ties rates directly to costs, assuring equity. It minimizes cross subsidization between customers and provides rates that are responsive to changes in claim patterns. The relative rates for the Corporation s existing territories are tied directly to historical costs. For most major classes, the loss cost data by territory is highly credible and consistent year-to-year. In cases where there is less credible data (e.g. motorcycles), the territory relativities are adjusted on a more gradual basis. The table below shows the rate implications for Major Class 1, private passenger vehicles, of charging the same rates to all territories. The calculations are based on the territory relativities approved in the 2011 Rate Application. Under a flat rating approach, customers in Territory 2 would experience an 11.2% rate increase to subsidize the higher costs of customers in all other territories. Page 5

6 Territory Vehicles Current Relative Rates One Territory Rate Change 1 369, % 2 278, % 3 9, % 4 14, % 5 33, % The Corporation strongly opposes flat rates across territories. Flat rating across the five territories would not be actuarially sound and statistically driven. The change would create significant cross subsidization among customers. SM.5.9 Operational and Claims Cost History In Order 145/10, the Public Utilities Board ordered that: MPI file (in next year s GRA) charts comparing its increases in operational and claims costs since 1988 with vehicle and driver population growth and general price inflation. The information requested has been filed in TI.5. The graph in TI. 5 Part 1 outlines the comparison of Basic claims costs and operating costs per vehicle since 1993/94. Claims costs have been shown on an accident year basis, as at February 28, The costs are not readily available prior to 1993/94. For comparison purposes, claims expenses are included in claims costs and operating costs include operating expenses, commissions, premium tax and regulatory/appeal costs. This comparison shows that early in the time period, the operating costs per vehicle rose faster than inflation. This coincides with the amortization of development costs for projects such as Autopac-on-line and Y2K. As these costs were fully amortized and operational efficiencies emerge, these costs return to the inflation trend line. The same pattern is evident with the amortization of BPR costs. The costs have recently risen faster than inflation. Once the benefits of these projects are realized, such as the decrease in commission costs, we are confident that these costs will Page 6

7 return to the long-term inflation trend. Claims costs have tracked the consumer price inflation closely since SM.5.10 Average Premium History In Order 145/10, the Public Utilities Board ordered that: MPI file (in the next year s GRA) a chart comparing the average premium for passenger vehicles and overall annual net earned Basic premium, since 1988 (average annual passenger vehicle premium compared to general inflations), and a chart comparing overall annual Basic net earned premiums with inflation and vehicle population growth. The average premium history can be found in TI.5 Part 2. In order to comply with the Board s Order, the Corporation made the following adjustments: Earned Premium was used instead of Net Earned Premium as the Corporation did not have the Net Earned Premium history split by Major Class. The overall trend lines are expected to be the same for gross and net premiums. The Manitoba Driving Age population from Statistics Canada was used to approximate driver earned units as the Corporation does not have accurate driver information back to Vehicle premium and earned units by Major Class were not available prior to 1997/98, so the Private Passenger Vehicle analysis is from 1997/98 to present. However, the overall results from 1988/89 to 1996/97 will be a close reflection of the Private Passenger only experience, since over 90% of the premiums are from this class. Manitoba Consumer Price Inflation from Statistics Canada was used to estimate inflation over the historical period. Passenger Vehicle Inflation from Statistics Canada was used to compare the Corporation s average premium growth to other provinces and Canada. Page 7

8 SM.5.11 Cost Allocation In Order 122/10 (and repeated in Order 44/11), The Board orders that the proposed cost allocation methodology not be implemented until such time as the Board has had an opportunity to review all underlying expenses allocated. In its Order 161/09, the Public Utilities Board found both the Deloitte cost allocation methodology report and the evidence of Deloitte s representative to be valuable and credible with respect to the development of a revised cost allocation formula for the Corporation. The Board directed the Corporation to further its research into the proposed methodology for consideration at the 2011 General Rate Application. This further research was completed. However, in Order 145/10, the Board endorsed the new method but disallowed the use of the new methodology for ratemaking purposes. The Corporation s application to review and vary this aspect of the PUB s order was rejected by the Board in Order 44/11. The Corporation is satisfied that the new methodology better allocates the costs to its lines of business, and will therefore implement the new methodology for financial reporting, effective March 1, Compared to the old methodology, expenses will be reduced for both Basic insurance and DVA operations, while Extension and SRE will experience an increase in allocated expenses. However, in accordance with order 122/10, the Corporation will calculate the required Basic Autopac rates, based on the old allocation basis until such time as Public Utilities Board approves the use of the new methodology for basic ratemaking. SM.5.12 Recommendations SM Manitoba Health Cost Payment Agreement MPI file evidence to support increases to MPI s hospital related PIPP costs and seek to negotiate binding contracts with the Government, not only with respect to health costs but also with respect to DVA. Page 8

9 In response to CAC/MSOS (MPI) 2-26 (b) in the 2011 Rate Application, the Corporation provided a comparison of health cost recoveries by province to support our view that the increase in health cost recovery submitted to the province is not unreasonable in comparison to other provinces. The payment increase brings Manitoba closely in line with payments made in Alberta and Saskatchewan. New Brunswick has the highest health cost levy per vehicle. The 2008 New Brunswick levy was $47.22 per private passenger vehicle as compared to $28.53 estimated for Manitoba (simulated recovery based on 2010 increase). However in the 2006 New Brunswick Report of the Auditor General, it was stated that the amount of the levy is probably below the costs incurred in treating motor vehicle accident injuries. The new Health Cost Payment Agreement with the provincial government is pending and will be made public once it is completed. The Corporation will not be seeking to negotiate a contract with respect to administration of The Drivers and Vehicles Act. SM King Street Donation In Order 145/10, the Public Utilities Board recommended that MPI seek recovery from the Province for the King Street property donation; The Manitoba Public Insurance Board of Directors acted within their authority in disposing of the King Street property. The Corporation will not be seeking recovery from the Province for the donation. SM Broker Commission MPI review the costs and benefits of the current arrangement with brokers on an annual basis, both with respect to Basic and other lines of business, and file the analysis with the Board within the annual GRA; Brokers are paid in accordance with the Agent Commissions Regulation 93/2009 ( Page 9

10 SM Road Safety MPI work with the Winnipeg Police Service, the RCMP, the Manitoba Department of Justice, the Manitoba Department of Transportation, the Manitoba Safety Counsel, Mothers Against Drunk Drivers as well as the interveners in this hearing, to address and move toward improvement in road safety matters. The Board would welcome a technical conference at which road safety matters can be discussed; See AI.10 Part 2 Road Safety Vision. SM Red Light Camera & Photo Radar MPI provide an analysis of options involving red light camera and photo radar infractions being assigned DSR demerits upon conviction. And MPI conduct research into the relationship between red [light] camera and photo radar infractions and at-fault accidents; The Corporation has no record of which vehicle have received red light camera and photo radar offences, nor does the Corporation have the statutory authority to get this data. Accordingly, the Corporation is not in a position to conduct any analysis regarding the relationship between these infractions and at-fault accidents. Furthermore, offences that draw demerits and the number of demerits for the different types of offences are the responsibility of the government of Manitoba, not the Corporation. SM Cell Phone Demerits MPI develop an option for the review of the Province wherein handheld Page 10

11 communication device infractions would lead to a demerit assignment for DSR purposes, supported by research into the relationship between such infractions and at fault accidents. The Corporation does not have any statistics regarding accidents relating specifically to use of hand-held communication devices. Should the Corporation decide to undertake this analysis, the results will be shared with the Government and the Government would then determine whether to advance legislative or regulatory changes to address these matters, not the Corporation. SM Wildlife area reduced speed limits MPI recommend to the Province that speed limits in areas known to involve high incidents of wildlife-vehicle collisions be reduced for those time periods during which such incidents are at their highest levels, and that MPI invest in additional electronic speed indicator signs and review what other measures could be taken to reduce those types of accidents during their peak season. The determination of speed limits is the responsibility of government, not the Corporation. The Corporation has identified high-risk wildlife collision areas as an item to consider in formulating our options to make roads safer. See AI.10 Road Safety Vision for further details. SM Motorcycle Graduated Drivers Licence a graduated licensing system be implemented with respect to new motorcycle riders, and as well a prohibition with respect to the ownership of sport bikes within the first five years of riding. The implementation of a graduated licensing system for motorcycle riders is the exclusive purview of the Legislature of Manitoba through amendments to The Drivers and Vehicles Act and associated regulations. Page 11

12 SM Basic Coverage Improvements MPI list and consider potential improvements to Basic coverage, with comparisons to coverage in other jurisdictions, and develop analyses providing the premium and cost implications of options, and the potential impact on Extension and SRE, for discussion at the 2012 GRA. Expanding basic Autopac coverage is the exclusive purview of the Legislature of Manitoba through amendments to The Manitoba Public Insurance Corporation Act and regulations thereunder. A comparison of Basic coverage in other jurisdictions is provided in AI.2. SM Extra-Provincial Truckers In Order 145/10, the Public Utilities Board recommended that MPI join the Board in recommending that PIPP costs being incurred with respect to the exempted extraprovincial trucks and P.S.V. trucks and buses be recovered from the Province. The Corporation does not support the suggestion that PIPP costs being incurred with respect to exempted vehicles be recovered from the Province. SM PIPP and Workers Compensation Board Benefits And MPI consider its position with respect to whether truckers should be permitted to elect benefits from MPI or WCB, and report to the Board. MPI conduct a comparison between PIPP benefits and WCB coverage. The Corporation has no position with respect to whether or not truckers should be permitted to elect benefits under PIPP or workers compensation. The right of election is a provision within The Manitoba Public Insurance Corporation Act. Benefits available under PIPP are contained within The Manitoba Public Insurance Page 12

13 Corporation Act and associated regulations. Benefits available under workers compensation are contained within The Workers Compensation Act and associated regulations. SM Investment Portfolio MPI research and provide an opinion on increasing the equities component of its investment portfolio to a 40% allocation, including a cost-benefit analysis of its current approach to investing policyholder derived funds. The Minister of Finance has jurisdiction over the Corporation s investments. The current asset mix is based on the Asset Allocation study that was completed in SM Five Year Averaging for Investments MPI consider the use of 5 year averaging, to reduce the annual rate and net income risks that come with increased volatility within the investment market, and report to the Board on this suggestion at the next GRA. The Corporation uses forecasted market yields on government bonds and Canadian CPI over a five year period to estimate expected investment income from the investment portfolio. The forecasted rates are calculated using the median estimate from the five major Canadian banks and Global Insight. The median forecasted rates are used to determine the expected income for the three major asset classes in the portfolio fixed income, equities, and alternatives. The forecasted Government of Canada (GoC) 10 year bond rate is used as the basis Page 13

14 to forecast the fixed income portfolio return. The average long-term government bond yield over the five year forecast period plus an equity risk premium of 1.5% is used to estimate investment income from equities. Finally, investment income from alternative asset classes such as real estate and infrastructure is estimated using the five year forecast of Canadian CPI plus a spread of 4% and 5%, respectively. Actual earned investment income can vary significantly from the budgeted amount due to the volatility of equities during any one year period. This volatility was the case during the 2008/09 fiscal year, when actual investment income was $104.8 million lower than budget. Over the last two fiscal years investment income was $1.8 million lower and $4.2 million higher than budgeted, respectively. It is expected that over the long-term, the difference between actual and budgeted investment income will, on average, be minimal. From fiscal 2001/02 to 2010/11, the average difference between actual and budgeted investment income was $6.2 million. In summary, a forecast for investment income for rate-setting purposes uses an average return over the forecast period and therefore reduces the volatility in ratemaking. For financial reporting purposes, treatment of investment income for periods prior to March 1, 2011 was in accordance with GAAP. After February 28, 2011, reporting is in accordance with IRFS. SM Real Estate and Infrastructure Investments MPI engage only in those real estate and infrastructure investments that involve commercial terms, meaning commercially reasonable and armslength investments. The Minister of Finance has jurisdiction over the Corporation s investments, as per the Manitoba Public Insurance Corporation Act. Page 14

15 SM Government Control of Investments Government consider whether control over MPI s investments should, in the interest of MPI s policyholders, be provided to MPI s Board of Directors, in order to eliminating what appears to be an inherent conflict of interest. The Corporation has no response as this recommendation is directed to the Government. SM Claim Buy Backs MPI permit no further buy backs of accident costs with respect to private passenger vehicles, from the date of implementation of the DSR, except for situations where the buy back is for an accident for which no injuries or fatalities occurred, and for which the total claims costs did not exceed $1000; with respect to commercial fleets no buy backs should be permitted, excepting in cases that involve neither an injury nor a fatality. The Corporation does not anticipate making any changes to the buyback program. SM Rate setting for Environmental Objectives In Order 145/10, the Public Utilities Board stated: The Board notes its recommendation (in Order 161/09) that MPI seek direction from Government concerning the potential use of the rate-setting model to further the government s environmental objectives. With respect, it does not appear that the Corporation has spend much, if any effort considering environmental issues, and as such the Board is concerned over what may be short shrift given by the Corporation to this area, including the recommendations and suggestions of interveners and presenters. The Board therefore repeats its recommendation from last year. Page 15

16 Use of the rate setting model to further environmental objectives is an issue of social policy. Discussion between the Corporation and the Government on social policy are confidential. The responsibility for announcing social policy decisions rests with the Government, not the Corporation. SM Unaudited Quarterly Reports In Order 145/10, the Public Utilities Board recommended that MPI engage its external auditors to review its unaudited quarterly results prior to the statements being released. The Corporation s fourth quarter results for the 2010/11 fiscal year were reviewed by the external auditors prior to their release and the Corporation has engaged them to review the first quarter results of the 2011/12 fiscal year. SM Green House Gas Emissions In Order 145/10, the Public Utilities Board recommended that MPI consider options to further the government s objective of reducing GHG emissions. The Corporation is committed to operating in an environmentally sound manner and engages in many options to reduce greenhouse gas emissions including: - Locating new Service Centres in heavily populated, growing neighbourhoods, reducing greenhouse gas emissions by reducing the distance customers drive to access our services. - Building new centres and upgrading existing facilities to high environmental standards. - Recycling a wide variety of materials, including paper and cardboard, plastic and metal containers, building fixtures, carpet and electronic devices, and vehicles and vehicle parts. - Reducing fuel consumption through the use of hybrid vehicles and fuel efficient cars. Rate setting to reduce greenhouse gas emissions is an issue of social policy. Decisions on social policy are the responsibility of Government, not the Corporation. Page 16

17 SM.5.13 Undertakings SM Undertaking #40 Impaired Driving Fatalities During the 2011 General Rate Application Hearing, the Public Utilities Board requested Manitoba Public Insurance: provide information on the split between fatalities related to impaired driving between rural and urban parts of Manitoba in the next GRA filing. The response to Undertaking #40 follows: Page 17

18 Victims Killed in Alcohol-related Collisions in Manitoba, by Urban vs. Rural Location: 2003 to 2009 Base: Alcoholrelated collisions Occurrence Year Average Fatalities Fatalities Fatalities Fatalities Fatalities Fatalities Fatalities Fatalities Urban % 42% 24% 29% 26% 26% 28% 27% Rural % 58% 76% 71% 74% 74% 72% 73% Total Source: Police-reported data (Traffic Accident Reports) for collisions in Manitoba from 2003 to 2009 Notes: 'Alcohol-related' is a combination of the contributing factors recorded by police as 'Impaired by alcohol' and 'Had been drinking/suspected alcohol use'. 'Urban' collisions are those collisions occurring within the municipal boundaries of urban areas, including Winnipeg, Brandon, Portage la Prairie, Flin Flon, Dauphin, Thompson, The Pas, Selkirk and 'Other Urban'. 'Rural' collisions are those collisions occurring on primary highways, secondary highways and local roadways, including the Trans Canada Highway and excluding those that occur within the municipal boundaries of an urban area. SM Undertaking #41 Fatalities without Seatbelt During the 2011 General Rate Application Hearing, the Public Utilities Board requested Manitoba Public Insurance: provide recent information relating to fatalities where no seatbelt was worn, with either a territorial or urban-rural split in the next GRA filing The response to Undertaking #41 follows: Page 18

19 Occupant Restraint Device Use Among Vehicle Occupants Killed Aged 6 and Older: 2003 to Proportion of Fatalities Average All victims Killed Restraint Used 33% 43% 49% 43% 45% 38% 51% 43% Restraint Not Used 50% 41% 35% 42% 34% 42% 29% 39% Unknown/Restraint unavailable 17% 16% 16% 14% 21% 20% 19% 18% Victims Killed in Urban Crashes Restraint Used 42% 41% 41% 50% 47% 33% 67% 46% Restraint Not Used 17% 27% 35% 31% 26% 28% 27% 27% Unknown/Restraint unavailable 42% 32% 24% 19% 26% 39% 7% 27% Victims Killed in Rural Crashes Restraint Used 32% 44% 51% 42% 45% 39% 47% 43% Restraint Not Used 56% 46% 35% 45% 36% 47% 30% 42% Unknown/Restraint unavailable 13% 11% 14% 13% 19% 14% 23% 15% Count of Fatalities Average All victims Killed Restraint Used Restraint Not Used Unknown/Restraint unavailable Victims Killed in Urban Crashes Restraint Used Restraint Not Used Unknown/Restraint unavailable Victims Killed in Rural Crashes Restraint Used Restraint Not Used Unknown/Restraint unavailable Source: Police-reported data (Traffic Accident Reports) for collisions in Manitoba from 2003 to 2009 Notes: Occupant restraint devices include seatbelts of various configurations and child safety seats. Vehicle occupants include drivers and passengers of vehicles and excludes bicyclists, motorcyclists (and moped riders), pedestrians and those who may have been riding or hanging onto a vehicle. Urban' collisions are those collisions occurring within the municipal boundaries of urban areas including Winnipeg, Brandon, Portage la Prairie, Flin Flon, Dauphin, The Pas, Selkirk and 'Other Urban'. 'Rural' collisions are those collisions occurring on primary highways, secondary highways and local roadways, including the TransCanada Highway and excluding those that occur within the municipal boundaries of an urban area. Page 19