Public insurer makes its case for an auto rate hike next year

Citing escalating auto repair costs and catastrophic hailstorm damage last August, Manitoba’s public auto insurer has applied to the province’s insurance regulator for a 3% auto insurance rate increase for 2025-26.

“The proposed rate increase is necessary to address a steady and prolonged rise in the cost of claims as well as the cost of labour, raw materials, and technology [required for auto repair],” Manitoba Public Insurance [MPI] says in a public comment, stating the case for its requested auto rate increase.

“This trend is persisting across MPI’s Basic, Extension and Special Risk Extension lines of business. The corporation’s total insurance expense for the year was $1.7 billion, an increase of $334 million or approximately 24% compared to the previous year.”

MPI also continues to process claims for a record-severe hailstorm in August 2023.

“The August 2023 hailstorm in the Winnipeg area was the largest natural catastrophic event in MPI’s history,” MPI says in its filing with the province’s insurance regulator. “Over 15,000 hail-related claims were filed last year, which resulted in a negative $50 million impact to net income, created significant backlogs, and increased the amount the corporation had to pay out in claims.

“In the last year, the average cost per claim has risen by over $1,100.”

In its filing with the Manitoba Public Utilities Board (PUB), MPI says its actuaries have actually made the case for a 6.15% rate increase for 2025-26. However, the auto insurer applied for only half of that increase, citing its responsibility to ensure auto insurance remains affordable for Manitobans.

“Manitobans continue to experience the impacts of high inflation,” MPI says in its rate filing. “Many cannot afford an historic increase in the costs of their basic automobile insurance.

“To that end, MPI must achieve its mission and do its part to ensure that rates remain affordable, stable and predictable. Even when external factors outside its control may make it difficult to do so.”

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Even though MPI is asking for half the increase it says it needs, there is certainly no guarantee the PUB will accept the insurer’s request.

MPI’s rate filing notes that the PUB has consistently ordered lower rates than requested by MPI over the past two years. The impact is now hitting the auto insurer’s bottom line, with an $80—million loss to its basic auto insurance budget at the end of its 2023-24 fiscal year.

For example, in December 2023, the PUB ordered a 5% reduction in overall rates for universal compulsory automobile insurance for 2024-25 instead of the 0.1% decrease that MPI requested. This discrepancy “was the largest in the last 20 years of rate applications,” MPI says in its filing.

Similarly, MPI sought a 0.1% overall rate increase in its 2023 rate filing, But PUB instead ordered a 3.8% decrease. In the past two years, PUB has ordered an average 8.8% reduction in their basic auto insurance premiums, MPI observes.

“Although Manitobans reap the benefits of these low or lower rates, these benefits came at the cost of [ MPI Basic auto insurance]’s financial position,” MPI states in its rate filing for 2025-26. “In [MPI’s 2023 rate filing application], MPI projected needing $938 million to pay for the cost of incurred claims for 2023 24.

“However, a spike in the severity of claims towards the end of the year, among other things, rendered this projection far too low. In actuality, the amount required to pay claims last year was $1.05 billion, approximately $109 million more than expected and budgeted.”

 

Feature image courtesy of iStock.com/Marko Nikolic