Fixing up the ACC

Last updated 15:57 15/10/2009

I said I'd post something on ACC, so here goes. Oh dear, what a mess.

It's hard to know where to start really. Is it all Labour's fault for increasing entitlements but not premiums? Or the people at ACC, who seem keen to pay themselves large salaries but can't apparently count? Or the recession? Or the fully funded model? Or all of the above?

When news first broke earlier this year of a hole in the ACC accounts, many of us - and I include myself - were a bit sceptical of National's motivation, particularly given that excitable boy Nick Smith was in charge, and he is known for, well, exaggerating from time to time.

But the conspiracy theory peddled by Labour and the EPMU (i.e. Labour) that somehow this is all just a VRWC to derail the ACC, lower public confidence in it, and then sell it to the highest (or any) bidder just doesn't ring true for me.

For starters, I can't believe someone with chairman John Judge's commercial background is going to put his reputation on the line just to help the Government push a particular political ideology. Judge is not going to claim that the very existence of the ACC is under threat if it's not.

Second,  there have now been three relatively independent reviews of ACC's financial position, and all of them have come up with the conclusion that it is in the poo.

Third, there's little doubt that the additions made to the scheme by Labour a couple of years ago - including things like lump-sum payouts for the families of suicide victims, and physiotherapy, simply aren't affordable any more.

And fourth, even if National had somehow managed to convince ACC's auditors, and John Judge, and Treasury, and anyone else who's looked at the books to take part in the VRWC, it would all be for nought cos quite frankly, no one would touch ACC with a bargepole anyway.

The commercial insurance market has been devastated by the global financial crisis, and it's difficult to see any commercial insurer being remotely interested in picking up ACC's work at the moment.

On top of that, privatising ACC is a headache the Government simply doesn't need at the moment.

Having said all that, I do think Nick Smith has over-egged the pudding a little bit. At least some of the need for the big increases is because of the move towards fully funding the ACC.

Fully funding means that like a commercial insurer, ACC is required to hold enough in reserve to meet the claims it expects to have to pay out on over a given time. It has never operated like this before, but is now required to.

Originally this was to happen by 2014. The Government - and in fact Labour too - wants to push this out to 2019. You could question whether ACC should in fact ever be fully funded, but that's another argument.

The Government is also going to get some heat over the decisions it's made, and so it should. The massive increases in levies for motorcycles seems grossly unfair to me, and smacks of National hitting a group of voters it doesn't think are likely to be National supporters.

Sure, motorcycles are involved in more accidents, but how many of those were caused by car drivers? As a former motorcyclist myself, it was being knocked off my bike by some idiot in a car that prompted me to hang up my helmet.

Ramping up motorcycle levies also flies completely in the face of all the rhetoric from the Government about reducing congestion, cutting carbon emissions, using less petrol, etc etc. Not to mention parking.

The rises in the earners' levy are also going to cause some dark mutterings down at the pub and around the water cooler. That impacts directly on people's take-home pay, and in the case of the average wage-earner takes around a third of the tax cut they received back in April.

It also hits lower income earners much harder, since the earners' levy tops out at (I think) around $110,000 a year. In other words, once you earn over that you don't pay any more. So high income earners can not only afford the levy increase, but it's only on a proportion of their income - not all of it, like the lower-paid.

Granted, the lower-paid aren't natural National voters either, but there's some Kiwi battlers in the middle there who voted National in 2008 and who might not be that happy right at the moment.

I hear National doesn't have the votes to get the changes through Parliament yet, either, although it probably will manage it eventually because it's cleverly set up a straw man in the form of even higher increases proposed by ACC that don't require a law change.

Therefore if parties don't vote for National's bill, the Government can accuse them of agreeing to even higher imposts on the public. That is quite clever.

The law change will be unpopular, however, and Labour will waste no opportunity closer to the next election to point out that the party who promised to lower your taxes and reduce the government's involvement in your life has, in some cases, done the reverse.

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Stormer   #1   04:05 pm Oct 15 2009

Frankly the whole organisation needs a broom to go through it.

Take "free" physiotherapy for example, how can anyone let a service which was budgeted to cost $8.9 million extra a year when it was introduced in 2004 go to $139 million this financial year (with expected costs to rise to $225 million by 2011/12) - all this with no evidence of any increased rehabilitation rates as intended???

Such waste would never be tolerated in the private sector and shows an absolute lack of accountability and common sense.

Charlie   #2   04:10 pm Oct 15 2009

To anybody that says ACC I say AIG.

Grant   #3   04:16 pm Oct 15 2009

#2 You've lost me. What's the link?

J-Ann   #4   04:17 pm Oct 15 2009

Increasing levies on motorcyclists and moped drivers does seem a little stupid. Especially mopeds. The things don't really go fast enough for someone to do real damage to themselves on anyway. Sure, falling off would hurt but if the person is wearing a helmet their injuries won't be as serious as someone who crashes or rolls a car, most of the time. Plus the things are better for the environment anyway. And I agree with your point about people in cars causing people on bikes' accidents, Colin. The only time I felt seriously close to crashing on my scooter was when some unbelievably stupid motorist would cut me off, or turn right in front of me.

Then again having driven a moped for a few months a while back I could be a little biased.

I just don't get why we don't open the insurance market up. Sure, make insurance compulsory but let the consumer decide who to buy it from. That way ACC will have to actually compete in the market, premiums will decrease and stupid decisions will no longer be feasible. Problem solved. Think I'm ready to run the world now :)

Brett   #5   04:30 pm Oct 15 2009

The no blame model is killing it, which is where private insurance providers would have it all over ACC. If you are a bad risk you must pay more than someone who is a good risk. ACC are saying all motorcyclists are a bad risk which is bullsh*t. The workplace accident account was opened up to private insurers by National, it worked brilliantly, businesses saved money and got better service. Labour promptly shut it down as soon as they got in. Where are we now 9 years later? Trying to fix YET ANOTHER Labour Govt pigs breakfast. They created a wholenother layer of welfare dependancy and now someones got to pay for it. ACC simply don't get the basics. If we have this many people, paying out this amount of money, have this many staff and pay them this much, we need to collect...oh bugger too hard, hell is it 10.30 already I'm off to lunch. Back at 3 Janice.

Cullen's Sidekick   #6   04:30 pm Oct 15 2009

Stormer #1 - "how can anyone let a service which was budgeted to cost $8.9 million extra a year when it was introduced in 2004 go to $139 million this financial year (with expected costs to rise to $225 million by 2011/12) - all this with no evidence of any increased rehabilitation rates as intended??? "

Stormer - Let me teach you some financial principles which my master taught me.

1. Kiwis don’t understand the big picture. So all we need to do is say something nice to them and not explain the full details. That is for the next Government to worry about – examples: interest free student loan scheme, ACC physiotherapy 2. There is no need to balance anything. In the grand scheme of things everything will balance one day and we won’t be there at that time to justify 3. Kiwis are suckers for free Government services. As long as they are willing to pay more taxes for Government services which they can organise themselves much cheaper, ride them 4. Our aim is to achieve social justice. This means making the rich pricks, middle class Kiwis, then make them poor Kiwis and finally get them on the dole. They will vote for you eventually 5. When you come up with some forecasting/budgeting always drop one or two zeros from the figures. As you know zero has no value any way

Stormer – Start practising these golden principles and you could be the next Treasury Head.

Sheelagh   #7   04:41 pm Oct 15 2009

Good on you Colin. This blog was inevitable . The ACC is a blight on New Zealand's horizon. It has been ripped off by low lifes who believe that the country owes them big time. I have been well looked after by ACC. I broke my ankle two years ago and was treated extremely well.I spent a week in hospital, then ,after contracting an infection I had to spend many hours in the orthopaedic's outpatient department in the hospital .There was one guy there who told me that he got a taxi to and from the hospital and had done so for several years . He was able to walk easily and told me he could easily catch a bus as there was a stop right outside his home and the bus stops right outside the hospital.When I asked him why didn't he catch the bus he told me that if they were stupid enough to pay for taxis he wasn't going to stop them .He lived in the Rangiora area which is a considerable distance from Christchurch Hospital.With attitudes like that no wonder the ACC is in a mess even though the Labour Party's David nosey Parker says Dr Smith is fabricating the figures.

Ahem   #8   04:48 pm Oct 15 2009

Even the Independent thinks this is about privatisation. Or are they left-wing conspiracy theorists too, Colin?

Alan Wilkinson   #9   04:51 pm Oct 15 2009

I just love it how ACC has been so busy telling us how to live our lives while it can't manage to live within cooee of its own budget. Typical bureaucracy.

The obvious solution is to privatise it, shoot it in the head and put it out of its misery. Alternatively, let those who want it, pay for it. That would produce the same outcome.

Kevin   #10   04:52 pm Oct 15 2009

I'm guessing that the link between ACC and AIG Charlie is talking about it something to do with AIG, the worlds biggest insurance company, got into a bit of trouble not having enough assets to cover liabilities. Therefore the USA government bails them out to the tune of something like US$80 billion, rather than getting AIG to increase premiums/reduce payouts during the recession as bad knock on effect. Whereas ACC who also has trouble with assets not covering liabilities, but the NZ government demands premium increases and reduced payouts to balance the books.

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