MPI’s math doesn’t add up or inspire confidence

Opinion

It was Manitoba Public Insurance’s turn to “take out the trash.”

That phrase is used by politicos to describe the process of making embarrassing or controversial government announcements on Friday afternoons to discourage news media from doing full reports.

On this particular Friday, MPI held onto the details of its most recent — and hilariously unintelligible — rate application until the last possible moment to dampen news coverage.

In a news release posted at 2:13 p.m. on a muggy afternoon, when thousands of Winnipeggers were already heading to the lake, MPI revealed it will ask the Public Utilities Board for a three per cent increase in Autopac rates for next year. MPI is boosting a number of other licence and insurance fees, which bring the real rate increase closer to four per cent.

However, there is so much more in this release than meets the eye.

In its application, MPI argues it needs additional revenue because of an array of issues: the PUB forced it to cut rates by five per cent last year; a long strike with unionized workers; huge claims associated with hail storms in 2023; and high inflation on labour and parts for automobile repairs.

Oddly, if you look at the actuarial calculations in the PUB application, there is a case to be made for a much larger increase in Autopac rates — perhaps as high as six per cent. That raises two troubling questions.

First, if MPI’s own calculations call for a larger rate increase, why does it ask for less?

The obvious answer is that MPI’s numbers are not reliable and not even executives at the Crown insurer believe they will pass PUB and intervener scrutiny.

It’s worth remembering that last year, the PUB rejected MPI’s request for a rate freeze, and ordered it to cut basic Autopac rates by five per cent. That cast a lot of doubt on the quality of MPI’s calculations.

Remember as well, CEO Satvir Jatana said in March that MPI would likely offer rebates again this year.

“If everything goes as is, where the reserves are, then there’s a good chance that our board will approve (a rebate),” she told the Free Press. “All indications are pointed in the right direction.”

How does a forecast rebate create an actuarial model that calls for a six per cent rate increase, and how does that become a three per cent rate increase? The quality of the actuarial calculations has to be an issue.

However, sources confirmed that although it did not issue a formal ministerial directive, the NDP government made it clear to MPI executives that a six per cent bump in Autopac would be profoundly inconsistent with its measures to improve affordability.

This brings us to a second question: with the eyes of political masters upon them, why hasn’t current MPI leadership made more progress in lowering operating costs, which significantly mitigate the need for any rate increase.

MPI suffered from years of mismanagement and rampant hiring under former CEO Eric Herbelin, who was fired in 2023. In the wake of that firing, all interested parties seemed to agree MPI was in desperate need of a reset.

A January 2024 organizational review by Ernst & Young — prompted in part by hundreds of millions of dollars in cost overruns for Project Nova, a badly mismanaged information technology upgrade — confirmed Herbelin had gone on an unjustified hiring spree, adding hundreds of new positions, many of them management level, that lacked clear job descriptions.

Not surprisingly, when Jatana was hired in March 2024, the need to run MPI more efficiently became job No. 1.

At the time, there were concerns Jatana, who had worked at MPI for many years before being promoted to the top job, might not have the fortitude to make tough decisions. These concerns were based, in large part, on the fact she served as an executive on Herbelin’s team while he was running MPI off the rails.

This rate application will do little to ease those concerns.

MPI did eliminate 32 management positions, largely by not filling vacancies and “rightsizing” roles. However, no meaningful steps were taken to cull the management positions flagged by Ernst & Young.

As for the rate application, the alarming disconnect between what MPI is asking for, and what it’s numbers show it should be asking for, amplifies concern about Jatana’s ability to get things back on track.

MPI is not wrong when it claims that the weather, labour disputes and inflation combined to hammer its bottom line. However, MPI maintains enormous reserve accounts to soften the blow from one-off events so that Autopac rates do not become volatile and unpredictable.

The current rate application is, in so many ways, unintelligible. The actuarial calculations seem flawed, so much so that Jatana and her team do not trust them. The lack of determined planning to reduce the headcount suggests current leadership may be overwhelmed with the task ahead of it.

Put it all together, and you have a collection of problems that are more than worthy of being included in Friday’s late afternoon trash.

dan.lett@winnipegfreepress.com