Manitoba government attempt to dictate auto insurer's reserves 'invalid,' Public Utilities Board rules

The Manitoba government had no right to interfere in the process of setting auto insurance rates withoutpassing a new law, the Public Utilities Board has ruled.

Premier Brian Pallister's government did not have the authority to pass a regulation earlier this year requiring Manitoba Public Insurance to increase the size of its reserve fund, the independent board said Tuesday.

The government wanted to inflate the reserve fundto cushion against unexpected rate shocks in the future, but during the PUB hearing, a consumers advocacy group argued that move undermined the independent nature of the rate approval process.

The boardmay feel compelled to hike rates to meet the new reservetarget, representatives of the Consumers' Association of Canada'sManitobabranch said during hearings in October.

On Tuesday, the PUB ruled the government's regulation "circumscribed the rate-setting jurisdiction of the board," which can only happen throughlaw, and thus the regulation is "invalid."

The decision pleases GloriaDesorcy, executive director ofthe Consumers' Association of Canada's Manitoba branch.

"It alsosends a strong message that government cannot just, you know, bring in a regulation to contravene its own legislation," she said.

Decisions on the reserve account traditionally havebeen left to the PUB, but this spring the Progressive Conservative government decided the reserve should be maintained at approximately$350 million, which would nearly double its size.

Crown Services Minister Jeff Wharton said Tuesday afternoon he didn't know enough about the PUB's finding yet to offer an opinion.

0.6% auto insurance drop

In the same ruling, the Public Utilities Board endorsedMPI's proposed0.6 per cent overallcut inauto insurance premiums next year which Wharton described as "good news."

The public insurer hadestimated the rate decreaseforprivate passenger vehicles there are more than 800,000 in Manitoba would be an average of 0.9 per cent, or $10.

Some customers would face higher premiums. Motorcycle rateswould increase an average of 5.1 per cent per year, MPI's proposal said.

A significant portion ofthe PUBhearing this fallwas devoted to the future of auto insurance deliveryand whether insurance brokers would be sidelined if moreservices wereoffered online.

The board said in its ruling it did not have the authority to direct MPI'sinteractions with service providers.

"Accordingly, the board is not in a position to issue directives to MPI as to how to offer online services to the public," it said.

Desorcysaid she was comfortable with that,but hopes the utilities board takes a stance once an online service model is in place. She said the way auto insurance is delivered going forward will affect rates, and rate-setting is withinthe board's jurisdiction.

TheProgressive Conservative government has previously faced accusations of interferingin MPI's dealings.

The province was accused oflobbying on behalf ofinsurance agentswho were worried that MPIwould shift some of its services online and cut brokers out of the process,the Winnipeg Free Press reported earlier this year.

Tuesday's decision proves the government is needlessly interfering in the affairs of a Crown corporation, saidMintu Sandhu, the NDPcritic for Manitoba Public Insurance.

"This is what we have been saying all along," he said.