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:
– 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
2

3

• 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)
4

• 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
5

(Percentage of Claims Costs 1994-2007)
• 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
6

• 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
7

• 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
8

• 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
9

• 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
10

At-Fault
Accidents X1
Previous Yr
0
0
0
1
1
1
2+
2+
2+
Minors X2
Previous Yr
0
1
2+
0
1
2+
0
1
2+
Actual
Frequency
Current Yr
0.0570
0.1115
0.1644
0.1012
0.1484
0.2191
0.1827
0.2327
0.2529
Y = .0582 + .0559*X1 + .0493*X2 R 2 = .9682
11
# Drivers
2002-2004
1,732,910
102,116
16,689
90,800
14,524
3,524
4,576
1,418
597

2002 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
10% below
20% below
30% below
40% below
50% below
60% below
70% below
80% below
90% below
100% below
12
% of Claims
$139
$276
$406
$562
$817
$1,216
$1,804
$2,681
$4,517
$5,000,000

• 07/08 Written Premiums
• Assets
• Unpaid Claims
• Retained Earnings
$651M
$2,178M
$1,384M
$145M
13

Distribution of Claims and Expenses in 2007/08
5%
10%
3%
Claims
Commissions
Operating
Premium Taxes
83%
14

14%
Distribution of Revenues in 2007/08
4% 2%
Vehicle Premiums
Investment Income
DL Premiums
Service Fees
80%
15

Class
Private Passenger
Commercial
Public
Motorcycle
Trailer
ORV
Proposed Avg. Rate
$905
$688
$1,649
$1,181
$44
$18
* Includes: All perils coverage ($500 ded.), no-fault personal injury protection, and $200K TPL. ORV’s only have TPL coverage.
16

Historical Premiums vs. Ultimate Losses
(in $millions)
Fiscal
Year
2003/04
Net
Earned
Premium
$549
Rebates
Paid
$0
EP excluding
Rebates
$549
Ultimate
Losses
$436
2004/05
2005/06
2006/07
$584
$619
$646
$54
$60
$63
$530
$559
$583
$463
$500
$555
2007/08 $665 ???
???
Loss
Ratio
79.4%
87.4%
89.4%
95.2%
$546 >=82.1%
17

18

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

• 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
20

• 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.
21

22

Actual Results as of February 28, 2005
Insurance Year Claims Frequency/
1000 Units
2000/01
2001/02
2002/03
6,216
6,584
5,823
17.67
18.52
16.12
Severity Incurred ($M)
$2,191
$2,435
$2,353
$13.6
$16.0
$13.7
2003/04
2004/05
6,371
8,401
17.46
22.71
$2,457
$2,744
$15.7
$23.1
Forecast
2005/06
2006/07
2007/08
2008/09
8,569
8,740
8,915
9,094
22.71
22.71
22.71
22.71
$2,827
$2,911
$2,999
$3,089
$24.2
$25.4
$26.7
$28.1
23

• 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 :
Group
Top 50
Top 100
Top 150
% Units
10.4%
18.7%
27.0%
% of Thefts
50.4%
66.5%
75.2%
24

• 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?
25

• 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.
26

Total Theft Frequency in Winnipeg/Commuter Areas
Total Theft Frequency in Winnipeg/Commuter Territories
January 1, 2004 to April 30, 2008
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
20
040
1
20
040
4
20
040
7
20
041
0
20
050
1
20
050
4
20
050
7
20
051
0
20
060
1
20
060
4
20
060
7
20
061
0
20
070
1
20
070
4
20
070
7
20
071
0
20
080
1
20
080
4
20
080
7
20
081
0
20
090
1
20
090
4
20
090
7
20
091
0
Year/Month
Most at Risk I Non-MaR Vehicles Most at Risk II
27

Actual versus Forecast
Insurance Year Actual Forecast Difference
2005/06
2006/07
2007/08
2008/09*
Total
* As at April 30, 2008
$19.3
$21.2
$14.9
$1.0
$56.4
$24.2
$25.4
$26.7
$4.7
$81.1
Immobilizers Installed*: ~100,000
Cost: ~$30M
-$4.9
-$4.3
-$11.8
-$3.7
-$24.7
28