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Manitoba Public Insurance

CAS Spring Meeting. Manitoba Public Insurance. Working with Manitobans to Reduce Risk on the Road Quebec City. June 2008. Basic: Compulsory coverage with guaranteed access Extension: Optional coverage above Basic Non-universal, profitable, open to competition SRE:

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Manitoba Public Insurance

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  1. CAS Spring Meeting Manitoba Public Insurance Working with Manitobans to Reduce Risk on the Road Quebec City June 2008

  2. Basic: Compulsory coverage with guaranteed access Extension: Optional coverage above Basic Non-universal, profitable, open to competition SRE: Ensures large trucking fleets have access to coverage Non-universal, profitable, open to competition Driver & Vehicle Licencing: Premiums collected on drivers license as mandated by government Lines of Business

  3. Basic Compulsory Program

  4. History • Manitoba Public Insurance Act passed • Operations began November 1, 1971 • Two main changes: • Compulsory insurance • Crown corporation • Terms and conditions of Autopac coverage and Manitoba Public Insurance responsibilities set down in legislation. • Insurance and registration linked (co-terminality)

  5. Founding Principles • Return 85 cents for every dollar collected • Premiums invested to provide income • Administered by one government agency • Compulsory, with guaranteed access • Minimize claims inconvenience • Provide reasonable, basic protection, with lower rates than those charges from private companies

  6. All Perils (53.6%) Collision and Comprehensive coverage with a $500 Deductible Personal Injury Protection Program (38.8%) No-fault accident benefits provided to all Manitobans injured in automobile accidents in Canada or the United States. Third Party Liability Coverage (7.6%) $200,000 limit Note: All of these coverages are mandatory Basic Coverage(Percentage of Claims Costs 1994-2007)

  7. Vehicle Rating Factors • Territory (4 territories & commuter) • Insurance Use • Rate Groups (modified CLEAR rate groups) • Registered Owner Driving Experience (Discount off base premium up to 25%) • MPI chooses not to use age, gender, or marital status as rating factors

  8. Drivers Licence Premium • Premium also collected on drivers license as mandated by government • Provides coverage not provided with vehicle premium: third party liability if unknowingly driving uninsured vehicle • Ensures all drivers contribute to the fund

  9. Why do drivers need to contribute? • Unique to public insurance: In private jurisdictions, owners must name all drivers on policy -- policy is on individual, not vehicle • Here, premium is on car, not individual – how to address? • Add premium to drivers licence • Amount of premium depends on driving record

  10. Basic Drivers’ Licence premiums: Range from $20 (5 merits) to $45 (0 merits) Demerit Point Additional Premiums Surcharge for customers with very poor at-fault claim and conviction history Range from $200 (6 demerits) to $999 (21 or more demerits) Accident Surcharges $200 to $1200 per at-fault accident Driver Licence Premiums

  11. Research on Driver Risk Y = .0582 + .0559*X1 + .0493*X2 R2 = .9682

  12. MPI’s Claims Size Distribution2002 to 2006 • Manitobans report the vast majority of their claims (~80% have a $200 deductible). • Reasons: • Compulsory Coverage • Guaranteed Access • Low Deductible • Relatively Minor Penalties for Average Drivers • Average payout may appear lower when compared to private companies

  13. 07/08 Written Premiums $651M Assets $2,178M Unpaid Claims $1,384M Retained Earnings $145M Basic Financial StatisticsFebruary 29, 2008

  14. How much do we need?

  15. Where does it come from?

  16. Average Rates by Class (2008) * Includes: All perils coverage ($500 ded.), no-fault personal injury protection, and $200K TPL. ORV’s only have TPL coverage.

  17. Historical Premiums vs. Ultimate Losses(in $millions)

  18. Corporate Accountability

  19. Minister and Cabinet Board of Directors Standing Committee of Legislature on Public Utilities Crown Corporations Council Public Utilities Board Appeals process, Ombudsman Corporate Accountability

  20. June: File Rate Application Six volumes of information July: Round 1 Information Requests 200 to 300 questions August: Round 2 Information Requests 200 to 300 questions October: Public Hearings 2 to 3 weeks December: PUB Order Rates effective March 1 of the following year The Public Utilities Board Process

  21. The Public Utilities Board also regulates the amount that MPI can hold in Retained Earnings for its Basic Line of Business The estimated PUB approved RSR range for 2008/09 is $72M to $109M, or the equivalent of 26% to 39% of MCT. MPI recommended using a range of 50% to 100% MCT in its 2007 Rate Application, but this was rejected by the PUB. The Basic Rate Stabilization Reserve (RSR)

  22. Interesting Actuarial Opportunities at MPI The Immobilizer Incentive Project

  23. Auto Thefts in Winnipeg

  24. Most at Risk List Grouped Vehicles in make/model/model year band combinations Examples of vehicle groupings: Plymouth Voyager 1990-1994: 1 in 9 stolen per year Dodge Caravan 1990-1994: 1 in 9 stolen per year 2002-2004 theft data by Rank for Winnipeg:

  25. Some possible options: Surcharge the most risky vehicles: Cost was estimated at approximately $200 in excess over our CLEAR rate groups Reduce Coverage: Raise deductibles or do not allow the purchase of reduced deductible Extension (optional) products Provide customers with incentives to protect their vehicles: subsidize immobilizer purchases Make immobilizers mandatory for certain risky vehicles: But who pays for immobilizer? Now what?

  26. June 2005: MPI offers to cover 50% the cost ($140) of installing an immobilizer. August 2005: Winnipeg Auto Theft Suppression Strategy (WATSS) April 2006: MPI offers to pay 100% ($280) of the cost to install an immobilizers on the “Most-at-Risk” (MaR) vehicles. Sept 2007: Immobilizers become mandatory on MaR vehicles. Sept 2008: Immobilizers become mandatory on MaR II vehicles. Action

  27. Total Theft Frequency in Winnipeg/Commuter AreasJanuary 1, 2004 to April 30, 2008

  28. Auto Thefts in WinnipegActual versus Forecast * As at April 30, 2008 Immobilizers Installed*: ~100,000 Cost: ~$30M

  29. Thank you

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