If you frequently break the rules of the road, you may soon need to break the bank to renew your driver's license.

A hearing to determine whether Manitoba drivers should pay more for auto insurance gets underway on Monday. Manitoba Public Insurance's application to the Public Utilities Board — which calls for an average rate hike of 2.7 per cent for its customers — also includes stiffer penalties for drivers who are on the negative side of its driver safety rating.

While those with a rating of zero or better would see no change in what they pay, those below zero could see their license fees increase by between $100 to $500, with those on the lowest end of the scale (negative 20) facing a bill of $3,000 to renew their licence each year.

"Let's say a driver at minus-8 on the driver safety rating level, the current surcharge is $400. The proposed surcharge would be $800," said Byron Williams, counsel for the Consumers Association of Canada's Manitoba division.

"At minus-12, the current surcharge is $900. The proposed surcharge would be $1,400. At minus-3, the current surcharge is $200. The proposed rate is $300."

Change would net MPI millions

The change to the fee structure, if approved, would deliver an estimated $17.5 million in additional revenue to the public auto insurer.

MPI officials weren't available for comment, but in its rate application, the Crown corporation stated the proposed change is "designed to directly incentivize better driving habits."

CAA Manitoba spokeswoman Liz Peters, and CAA Manitoba CEO Mike Mager make notes on passing vehicles at Archwood School. (Meaghan Ketcheson/CBC)

Mike Mager, president and CEO of CAA Manitoba, said his organization is supportive of the proposed fee structure.

"From my perspective, we have a scale that bottoms out at minus-20. To get down there, you've had to do some very significant and very dire driving behaviours that would create an unsafe environment," he said.

"We need individuals who are exhibiting those sort of driving behaviours to get the point."

Williams, who will present at the hearing, said MPI's driver safety rating system has been fairly well-received by the public thus far. He's uncertain whether this proposed fee structure is a good idea, however.

"[MPI has] made it more clear how good drivers get rewarded and drivers who have negative experience are forced to pay a higher price more reflectives of the risk they come to with the system," he said, noting his association has not taken a position on MPI's revisions to its driver safety rating scale.

"But there are important policy considerations relating to whether there is a point in time when the surcharges just get to too much."

Extra $29 to insure your vehicle

As for overall insurance rates, MPI's proposed 2.7 per cent rate hike would, on average, cost motorists an extra $29 per year for most insured drivers if approved by the PUB.

MPI said nearly 630,000 vehicles in Manitoba, excluding trailers and off-road vehicles, would be affected if rates go up, with about 54 per cent increasing by less than $50 annually. About 35 per cent of vehicle owners would see no change to rates.

The proposed hike comes after the public auto insurer posted a net operating loss of $85.2 million for the last fiscal year. The Crown corporation has cited climate change as a contributing factor, noting it recorded more than $45 million in hail damage claims last year.

In its report to the PUB, the Crown corporation said it is working internally to improve its bottom line by reducing the number of management positions and freezing their salaries, streamlining departments, reducing sponsorships and road safety messaging.

Byron Williams, of the Public Interest Law Centre, said he has concerns about MPI's proposed 2.7 per cent rate increase. (Kelly Malone/CBC)

Williams said consumers are usually concerned when MPI proposes increases that are higher than the rate of inflation.

"I think the key questions for Manitobans in this hearing are, has MPI got its management of its investment portfolio under control? We've got some significant concerns about that, that it's accepting undue risk for insufficient payback," he said.

"And another big question for Manitobans is, is MPI prudently managing its information technology systems, or is it being a bit too generous in terms of what it spends on that?"

The hearing is expected to continue until mid-October. A decision is expected by the PUB by Dec. 1, with any changes to rates taking effect on March 1.