Manitoba Public InsuranceWorking with Manitobans to Reduce Risk on the Road
Quebec CityJune 2008
CAS Spring Meeting
2
Lines of Business• 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
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
Basic Coverage(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
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
Driver Licence Premiums
• 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
11
Research on Driver RiskAt-Fault
Accidents X1Previous Yr
Minors X2Previous Yr
ActualFrequencyCurrent Yr
# Drivers2002-2004
0 0 0.0570 1,732,910
0 1 0.1115 102,116
0 2+ 0.1644 16,689
1 0 0.1012 90,800
1 1 0.1484 14,524
1 2+ 0.2191 3,524
2+ 0 0.1827 4,576
2+ 1 0.2327 1,418
2+ 2+ 0.2529 597
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
10% below $13920% below $27630% below $40640% below $56250% below $81760% below $1,21670% below $1,80480% below $2,68190% below $4,517100% below $5,000,000
% of Claims
13
Basic Financial StatisticsFebruary 29, 2008
• 07/08 Written Premiums $651M
• Assets$2,178M
• Unpaid Claims$1,384M
• Retained Earnings $145M
14
How much do we need?
Distribution of Claims and Expenses in 2007/08
83%
5%
10%3%
Claims
Commissions
Operating
Premium Taxes
15
Where does it come from?
Distribution of Revenues in 2007/08
80%
14%
4% 2%
Vehicle Premiums
Investment Income
DL Premiums
Service Fees
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.
Class Proposed Avg. Rate
Private Passenger $905
Commercial $688
Public $1,649
Motorcycle $1,181
Trailer $44
ORV $18
17
Historical Premiums vs. Ultimate Losses(in $millions)
Fiscal Year
Net Earned
PremiumRebates
Paid
EP
excluding Rebates
Ultimate Losses
Loss Ratio
2003/04 $549 $0 $549 $436 79.4%
2004/05 $584 $54 $530 $463 87.4%
2005/06 $619 $60 $559 $500 89.4%
2006/07 $646 $63 $583 $555 95.2%
2007/08 $665 ??? ??? $546 >=82.1%
18
Corporate Accountability
19
Corporate Accountability
• Minister and Cabinet
• Board of Directors
• Standing Committee of Legislature on Public Utilities
• Crown Corporations Council
• Public Utilities Board
• Appeals process, Ombudsman
20
The Public Utilities Board Process
• 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
21
The Basic Rate Stabilization Reserve (RSR)
• 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 $109M, or the equivalent of 26% to 39% of MCT.
• MPI recommended using a range of 50% to 100% MCT in its 2007 Rate Application, but this was rejected by the PUB.
22
Interesting Actuarial Opportunities at MPI
The Immobilizer Incentive Project
23
Auto Thefts in WinnipegActual Results as of February 28, 2005
Insurance Year Claims Frequency/1000 Units
Severity Incurred ($M)
2000/01 6,216 17.67 $2,191 $13.6
2001/02 6,584 18.52 $2,435 $16.0
2002/03 5,823 16.12 $2,353 $13.7
2003/04 6,371 17.46 $2,457 $15.7
2004/05 8,401 22.71 $2,744 $23.1
Forecast
2005/06 8,569 22.71 $2,827 $24.2
2006/07 8,740 22.71 $2,911 $25.4
2007/08 8,915 22.71 $2,999 $26.7
2008/09 9,094 22.71 $3,089 $28.1
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:
Group % Units % of Thefts
Top 50 10.4% 50.4%
Top 100 18.7% 66.5%
Top 150 27.0% 75.2%
25
Now what?
• 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?
26
Action
• 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.
27
Total Theft Frequency in Winnipeg/Commuter TerritoriesJan 1, 2004 to April 30, 2008
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
2004
01
2004
04
2004
07
2004
10
2005
01
2005
04
2005
07
2005
10
2006
01
2006
04
2006
07
2006
10
2007
01
2007
04
2007
07
2007
10
2008
01
2008
04
2008
07
2008
10
2009
01
2009
04
2009
07
2009
10
Year/Month
Th
eft
Fre
qu
ency
Most at Risk I Most at Risk II Non-MaR Vehicles
Total Theft Frequency in Winnipeg/Commuter AreasJanuary 1, 2004 to April 30, 2008
28
Auto Thefts in WinnipegActual versus Forecast
Insurance Year Actual Forecast Difference
2005/06 $19.3 $24.2 -$4.9
2006/07 $21.2 $25.4 -$4.3
2007/08 $14.9 $26.7 -$11.8
2008/09* $1.0 $4.7 -$3.7
Total $56.4 $81.1 -$24.7
Immobilizers Installed*: ~100,000 Cost: ~$30M
* As at April 30, 2008
Thank you