CMMG’s Lawyer Challenges Manitoba Public Insurance at Public Utilities Board Hearings.
CMMG’s Lawyer Challenges Manitoba Public Insurance at Public Utilities Board Hearings.
Public Utilities Board
October 5 & 6, 2017
Download and read both PDF’s containing CMMG lawyer Raymond Oakes cross examination of Ward Keith. It starts on page 122 (749).
THE CHAIRPERSON: Good afternoon, Mr. Oakes…?
MR. RAYMOND OAKES: Thank you, Mr. Chairman. Just before I start, I’d like to acknowledge, if I can, the graciousness of my colleague to the right, Mr. Williams, who is allowing me to not only go first this afternoon, but apparently tomorrow morning as well. It’s good to know that he’s still grounded despite his rising prominence in the highest court in the land.
THE CHAIRPERSON: Mr. Oakes, you mean Dr. Williams.
MR. RAYMOND OAKES: Yes. And Mr. Ward Keith, I also have a couple of lumps of sugar for you. I want to thank you for your direct evidence this morning. We’re very pleased to hear from someone with the dedication, professionalism and competence that you exhibit in these areas. It’s, I think, obvious to all those in the room and should be obvious to all Manitobans. So thank you for that.
MR. WARD KEITH: Thank you.
CMMG lawyer Raymond Oakes recently presented at the Manitoba PUB hearings on October 19, 2016 and October 25, 2016 regarding MPI. Below are the links to download the full PDF transcripts from the PUB site. They are quite long and in dept (too long to post here) but very much worth the read.
CMMG recommends everyone give these a good read as there is some great information and it really shows just how much work Mr. Oakes is putting into the fight on CMMG’s behalf.
MR. RAYMOND OAKES: And we see in 21 those two Roman numerals, I and II, further 22 explanation of the general statement about the 23 increase driven by higher claim costs and a negative 24 financial climate. And there, Mr. Johnston, you see 25 that they're further described as: 1 "...an increase in comprehensive 2 claims forecast driven by higher 3 than expected hail claims, and 4 overall -- and higher overall 5 comprehensive severity growth in 6 2015/'16." 7 Do you see that as the corp – 8 Corporation's rationale? 9 MR. LUKE JOHNSTON: I do. 10 MR. RAYMOND OAKES: And then secondly 11 the other item, the deterioration in forecasted 12 investment income. Is that correct, sir? 1 3 MR. LUKE JOHNSTON: That's correct. 14 MR. RAYMOND OAKES: So just staying 15 with that first bullet then, you'll agree with me that 16 this rationale doesn't relate to the need to extract 17 more money from motorcyclists. 18 Is that correct? 19 MR. LUKE JOHNSTON: The first bullet 20 point on comprehensive claims, motor -- motorcycles do 21 not have comprehensive coverage as part of Basic, so, 22 correct, this is unrelated to motorcycles. 23 MR. RAYMOND OAKES: And certainly the 24 motorcycles aren -- aren't out in wintertime. And 25 their experience, their losses, are mostly PIPP and 1 not physical damage. 2 Is that correct, sir? 3 MR. LUKE JOHNSTON: That's correct. 4 Injury claims are about 85 percent of their loss 5 costs.
MR. RAYMOND OAKES: Thank you for 25 that. If we can take a peak at CMMG Exhibit number 1 10, and last year we'd asked the Corporation to 2 compare the budgeted amounts for wildlife collision 3 initiatives with seatbelt and distracted driving 4 safety initiatives by comparing the budgeted amounts 5 for each of these road safety concerns with the 6 estimated losses. 7 The Corporation responded that that was 8 not possible at that time. The Corporation had 9 tentative plans in 2016/'17 for a costing study that 10 may be used for, or in the future for estimating the 11 losses attributed to distracted driving. 12 Where are we at with respect to being 13 able to answer that question, and the budgeted amounts 14 for those initiatives?
The PUB has recently approved of a Manitoba motorcycle insurance rate drop of 7.6% effective March 2016. Combined with the rate drop in 2015 this means that the CMMG has helped Manitoba motorcyclists reduce their insurance premiums by 15% in just the last 2 years and close to 30% in the last 5. This is a significant achievement and the CMMG has worked hard to get this done to the benefit of all riders.
The CMMG is a small group that is making a big difference in Manitoba that is reflected on your motorcycle premiums. This difference is made possible by the volunteers to devote their time and energy into fighting the broken system and working for change. But most of all it is made possible by the support of it’s members. Without the members there is no CMMG and with no CMMG there is no one left to fight MPI.
If your not a member of the CMMG, please consider joining. The cost is small, the benefits are huge. For as little as $25 a year you can help further the fight for lower insurance rates and more.
On October 21st CMMG lawyer, Ray Oakes, attended the PUB hearing on behalf of the CMMG. Below is the transcript of Ray’s final argument at the PUB hearing.
You can also download a Ray’s final argument as well as MPI’s final argument. If you want to kill time this winter with some light reading, you can also read the full transcript of the PUB hearing here. All 160 pages of it.
CMMG Director 1, Doug Houghton, also gave a report at the PUB meeting and you can read his presentation here.
MR. RAYMOND OAKES: Thank you, Madam Chair. Board counsel closed with a thank you to the participants and to the Board and MPI. I’d like to open with ‘thank you’. In the past three (3) weeks we’ve had the benefit of having a very professional, respectful exchange of discussions on various issues. And I’d like to thank the Board, both the Board counsel, its advisors, and the MPI panel for that respectful exchange and for the quality of the testimony of the witnesses and for the Intervenors’ counsel and their cooperative efforts, as well.
I’m told — it’s whispered to me that MPI is pleased with at least one (1) part of the CMMG intervention, and that’s that the CMMG intervention was primarily concerned with the rate and the rate setting. This is a very complex hearing over the course of the last three (3) weeks with a — a number of very intensive issues. In fact, the first couple of days, we had one (1) presenter who was so confused with the issues, he thought this was a general rate application.
But — but we’ve gone on to examine each of these diverse and difficult issues. And the thrust of the CMMG argument will be that the actual rate calculations in this GRA provide a directional guidance for this Board in setting rates. In other words, the methodology and the calculations produced are not a certain figure requiring the slavish adherence of this Board to the applied-for rate. I’m going to be bold at this point and ask this Board to set the — the decrease for motorcyclists at 12 percent for the 2016 upcoming year for the reasons that follow. And as we can see from a review of the rates put before this Board in the final Board orders, the Board has more or less approved the applied-for rate. Usually some minor modifications. To do this means that the actuarial methodology would need to be precise and accurate calculations with only one (1) answer forthcoming from those calculations. We’ve seen in the cross- examination that CMMG provided this year that that’s not the case. Mr. Johnston, at page 1,145 of the transcript, in referencing the calculation of rates and methodology said, Motorcyclists were going to be wrong every single time — or motorcycle rates were going to be wrong every single time.
MPI’s methodology is different than the majority of insurers, as we reviewed at page 1,128 of the transcript, and the previous page. Mr. Johnston accepts that the approaches of other actuaries would be reasonable in — in using shorter periods of data. In fact, the Corporation can’t produce another insurer that uses the same methodology as MPI. They have no capping of serious losses. The time frame for the data used is ten (10) years, whereas most actuaries use five (5). They have no weighting for the more recent data.
And MPI recognizes the new trend in motorcycle claims costs. We saw in Exhibit 36, which was Pre-Ask 8, the actuary from Aon and IAO in — recognizes that in Ontario, Alberta, and the two (2) maritime provinces they report on, that claims costs are decreasing year after year, resulting in a reduced rate year after year. We have closer to home, in the response to CMMG-1-13, MPI recognizes as follows. Their response says that: “A recent trend of decreases in required rates suggests the motorcycle major class is improving.” Mr. Guimond enters the fray at page 1,209 of the transcript, and he says: “I think what’s happening there is we can see the rates going down for motorcycles. We can — things are going in the right direction.” And despite that recognition of the Corporation formally in that respect, they don’t recognize it with respect to the methodology used in calcing — calculating rates because they equally weight the last ten (10) years of data instead of weighting these years that — that provide that trend, and proving more weight to them.
And that approach would be more in line with the actuarial standards, and the one that we looked at or one (1) of the ones we examined was seventeen thirty decimal oh-three (1,730.03), and it’s contained at page 1,137 of the transcript. What that says is: “Other things being the same, pertinent past experience data, or data relating to the case itself rather than to similar cases, relating to the recent past rather than the distance — distance past.”
So it goes on, and that’s the standard that requires taking that trend into consideration and providing more weight. Instead, what we have is the Corporation using a 2006 outlier. Page 1,132 of the transcript, Mr. Johnston says: “We haven’t had a year like that again since 2006, and I hope we don’t.”
So back, if you will, to our original bold request, and we look at CMMG IR-23. If we remove just that one outlier of 2006, we have a 12.7 percent decrease calculated for motorcycles. And I suggest to the Board that’s the only reasonable thing to do based on the actuarial standards, based on usual practices.
If we — if we use five (5) years on serious losses, and the reference for this is page 1,177 of the transcript on lin — line 11, then we have a 12 percent decrease. We keep coming back to that same figure with respect to the decrease. And they’re — what Mr. Johnston said at page 1,177 was: “For 2012 GRA, we revised the averaging of non-serious PIPP losses for the motorcycle major class from using a five (5) year average to using a ten (10) year — year average. This had a positive impact on the major class rate indication at the time, as it lowered the rate decrease by a further 4.2 percent in that year. So the rate decrease ended up being 12 percent instead of 7.8 percent before we made that change.”
MR. RAYMOND OAKES: And in terms of that change, which was only made in 2012 to go to ten (10) years of data for non-serious losses, I’d also point out to the Board the discriminary nature of that, because that’s something that they don’t do for private passengers. The inequity of this situation is compounded by the application of the indicated rate change versus experience rates, the capping that MPI uses. It’s referred to CMMG Interrogatory 1-3(b).
It’s contained at page 1,149 of the curr — transcript. And the — the perverse nature of this rate capping, when we look at the large double digit increases in rate shock that motorcyclists experience, you can understand how this is the salt in the wound of the motorcyclists. In ninet — in 2004/’05, we had rates increase approved by this Board of 14.82 percent. 2005/’06 it was 13.88 percent, I believe, looking at my notes. And as recent as 2008/’09, we had 9.16 percent increase approved. And those all come out of CMMG-1-3, for the reference.
So the motorcyclists in this period get this tremendous rate shock, and then when the Corporation comes — when it finally realizes that they’ve been collecting far too much in motorcycle premiums and says, Well, you’re not going to get the decrease overall that you would otherwise be on the indicated — or the required rate. What we’re going to do is cap that, and the reason for this capping is apparently rate shock. Well, how can rate shock, the rationale for that, come into play to reduce an overall decrease of some 82 — 8.2 percent decrease in the required rate? It’s illogical, and as I say, perverse.
Moving to the issue of road safety, we see the puny investment that MPI makes in motorcycle- specific initiatives is even less than that as contained at page 1,210 of the transcript. MPI notes it spends less than its forecast for the last two (2) years on motorcycle issues. We see these reducing expenditures. Very difficult to — to mount effective cross-examination in the area of road safety this year and last year because, of course, it’s all under review. The Corporation isn’t doing anything different pending the results of the studies. And I think all I have to say in that respect is when the product finally comes in, it better be good.
Certainly, we don’t see any new initiatives. The issue of wildlife collision continues to astound me, how little the Corporation does. When we look at the issue of wildlife containment by fencing and underpasses and the rest, all we have is the Corporation took a quick look several years ago at Birds Hill Park and what it would take to provide some collision (sic) there. They had a pretty dim view of what the efficacy of wildlife fencing and underpasses were.
They said, Well, seven hundred (700) ‘K’ would be way too much to spend on that particular initiative. What the Board can take some wisdom from, I think, is the study that was again presented in CMMG in their Pre- Ask 1, talked about efficacy of some 95 percent. And I think that’s a far more favourable number than what the Corporation was looking at when it did the cost- benefit.
I think the Corporation had a very dim benefit of — of what wildlife fencing collision would result in. But when we look at the fact when they say seven hundred thousand dollars ($700,000) is too much to spend, one only has to look at Undertaking 33 and look at what are the societal costs of collisions were it was $6.4 million for a fatality. Even if this Board doesn’t adopt that approach and look at the societal costs, it really doesn’t take much of an accident to produce seven hundred thousand dollars ($700,000) worth of savings. The Corporation over the past number of years has averaged about $30 million in claims costs for wildlife collisions. So I really think that spending sums of money like the Corporation took a brief look at is — is certainly warranted. We touched on a very unusual, difficult issue. I’m still struggling with how to address this, and I think counsel treated Mr. Guimond very gingerly. We all have a great deal of respect for the office of the president at MPI. It’s a very difficult job. And this was of course the discussion with Ms. Neville and Mr. Guimond about contractors. I’m not sure whether that was a discussion or a confession because we’re put in a very difficult situation trying to understand and evaluate the response of Mr. Guimond.
It’s something like coming to this public Board and telling — and — and advising us that MPI in this public forum can’t tell the public what these contractors make or can’t make them employees because then we’d have to disclose on a per- employee basis what they make.
And Mr. Guimond says it seven (7) times in the exchange. He doesn’t point to any other reason as he tried to with Mr. Williams, pointing to some distortion in their salary hierarchy. No, he says seven (7) times in the exchange, This is an issue.
The public wouldn’t accept it if we hired them as employees and paid them what we’re paying them now. I don’t know. Maybe it isn’t an issue that this forum needs to deal with and maybe it is. I think the Board last year had an exhibit, legislative report standing committee on Crown corporations. And it may well be that Mr. Guimond becomes an ungulate in the headlights in some other forum. But I find it very difficult to deal with that issue, and perhaps there will be some commentary from the other Intervenors.
Over to major issue on the RSR. This is again the — a very collaborative forum. Despite that, I think that perhaps the approach used this year will not likely be rep — repeated. I don’t think it should, in my respectful submission. It resembled more couples-therapy than it did two (2) actuaries trying to get to the bottom of a very complex issue.
But having said that, the CMMG aligns its position with Ms. Sherry. It says to the Board that there is no solvency risk of MPI. The CMMG sees anything more than one (1) in twenty (20) years as providing inter-generational inequity. The CMMG’s position is the MC test is totally inapplicable. CMMG would repeat its contention that the Corporation can’t justify a level that they’re requesting with holding excess funds from taxpayers or ratepayers and the economy. These levels that they’re seeking weren’t necessary in the 1990s. Manitoba sustained the more horrific one (1) in a hundred years flood ever, and there was basically very little MPI exposure. At the time, we had RSR levels between 50 and $80 million approved by the Board, and, frankly, when we review all of the exhibits dealing with what the actual exposures have been since then, we see two (2) years’ examples that were produced by MPI.
The testimony was confirmed yesterday afternoon that in 2002, which was one (1) of the two (2) years that MPI points to as these horrific years, at the end of 2002, we had a rebate of some $80 million. That doesn’t sound too horrific to me. When we asked further about four (4) year examples, MPI came up with four (4) month examples of equity returns that were negatives. You know, frankly, I don’t see anything justifying the type of levels that we’ve been talking about in this forum recently.
Page 1,190 of the transcript, the Corporation confirms they didn’t — they’ve never had this combination of all of those risk factors, and, frankly, how could they? The Corporation, as well, is well set up to handle some of the challenges it might have over the years. It has at least a couple of billion dollars worth of assets. The Corporation won’t tell us really how much they have, because they won’t tell us what the fair market value of its real estate is, presumably because of some income ta Xexposure.
But they’re backed by the Manitoba Government on a more secular, more specific approach, as well as motorcyclists. When I talk — spoke about the 2005/’06 increases of thir — or — and 2004/’05 of high 13 percent, high 14 percent increases for motorcyclists, we never saw any benefit from that. We experienced rate shocks all of those times with no help from any RSR.
Mr. Johnson (sic) makes the statement that the maximum combined rate increases and additional RSR rebuilding fee in a year should be no more than 5 percent. Well, we would have liked to have lived in that world. Where were those principles when we were getting whacked with 13 and 14 percent increases?
So those are our comments overall on all of the issues that we’ve dealt with in the last three (3) weeks. I’d again ask this Board to consider a rate decrease for motorcycles that’s far and above of the amount in the application for the reasons that I’ve stated. We will be sending our application for costs in due course. I’m not sure whether it’ll make reference to the use of the word ‘ungulate’ in the — in the fact that I broaden the horizons of this Board and increase it’s vocabulary, but we certainly hope that our intervention was of assistance. Thank you.
THE CHAIRPERSON: Thank you, Mr. Oakes. Now I’d like to call upon Ms. Kulyk, from CAA, to give her closing comments.
CLOSING COMMENTS BY CAA MANITOBA: MS. LIZ KULYK: Thank you, Madam Chair and members of the Board. CAA Manitoba is grateful once again to have this opportunity to sit as an Intervenor in the — in the GRA process, as we’ve done for twenty-one (21) years. We generally do make an effort to appear in person. And we regret we haven’t been able to do the — that this year, but we have been following the proceedings closely. And I’ll make a few brief comments just before the Board today.
So as I mentioned at the start of the hearings, our intention in intervening, really, is just to be armed with the facts so that we can then communicate to our — our large membership about auto insurance rates, but even more importantly, in our — in our view, road safety priorities. In regards to our comments, like I said, they will mostly pertain to road safety in the aspect of the rate-setting process, but we appreciate this is just one (1) element that’s been examined.
Manitoba motorcycle owners will have more options when they purchase insurance, Manitoba Public Insurance announced today.
“We are committed to working positively with the motorcycle community,” said Ward Keith, acting Vice-President, Business Development, Communications & Chief Product Officer, Manitoba Public Insurance. “Given the increase in the number of registered motorcycles and mopeds, and ongoing dialogue with motorcyclists through the Coalition of Manitoba Motorcycle Groups, (CMMG), the Corporation initiated these new products to address the insurance needs of the motorcycle community in Manitoba. “The new products will provide motorcycle owners with greater peace of mind and added convenience in the event of a collision. This is a positive step forward for motorcycle owners in our province.”
Available Monday, May 4, motorcycle owners will be able to purchase the following new products from their Autopac agent:
CMMG President Brian Segal said today’s announcement is a positive step forward for all motorcycle owners. “Our advocacy efforts are once again showing results,” said Segal. “Motorcyclists will now have extension insurance products on par with those of automobiles. CMMG is pleased to have been instrumental in making them available for motorcyclists.”