Espiner on ACC

October 16th, 2009 at 1:00 pm by David Farrar

blogs on ACC:

I said I’d post something on , 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 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.

I can never work out if Labour is the political arm of the EPMU or if the EPMU is the industrial arm of Labour.

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.

I actually laugh everytime David Parker insists you can’t trust the Government’s figures, considering the last Government’s failure to mention the ACC blowout broke the Public Finance Act. This is not an area of credibility for them.

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.

An employee on the average wage is now paying over $1,000 a year to ACC. That is a huge amount of money.

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.

I want to cover this argument in detail one day. Michael Littlewood has written at length that a Government backed insurer does not need to depart from the old model of collecting enough every year to cover payments for that year.

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.

Even under the changes, motorcyclists are being subsidised by other drivers. A motorcyclist is 16 times more likely to be involved in an accident. Not even if half are caused by motorists, that is still eight times more likely.

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 purpose of ACC is not to incentivise people to cut carbon emissions, reduce congestion etc. You have other taxes and policies for that. The purpose of ACC is to cover the costs of accidents.

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.

I don’t think it is clever. I think one should get 61 votes in favour before you announce the changes.

Also Whale Oil has a post on a payout to children of someone killed in an accident. I think there should be some initial support, but when did it happen that  ACC funds you until you are 18, if your parent dies in an accident. If your parent drops dead from a heart attack you get nothing, but if it is an “accident” you get ACC. The original scheme was about looking after people temporarily until they could work again – not social welfare.

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33 Responses to “Espiner on ACC”

  1. bchapman (649 comments) says:

    Wouldn’t it be better to take the $1000 we all contribute towards our own health insurance? That way people might take more care towards their own health and take responsibility for the risks they take in life. I’m bemused that ACC funds surgery as a result of sporting injuries, idiots who crash their car by driving too fast and children who crash on the skiifield.

    In Melbourne when I played AFL, the club had to pay for insurance for injuries (and hence took responsibilty to try and prevent major injuries), you paid for your own third party personal injury car insurance, you got life insurance (cheaper if you didn’t have a high risk lifestyle) and your employer looked after workcover injury. That way you had to take responsibility (and increased insurance premiums) for your own stupidity.

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  2. Graeme Edgeler (3,289 comments) says:

    Better to go for 62 votes. You know … just to be safe :-)

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  3. Graeme Edgeler (3,289 comments) says:

    Even under the changes, motorcyclists are being subsidised by other drivers. A motorcyclist is 16 times more likely to be involved in an accident. Not even if half are caused by motorists, that is still eight times more likely.

    Insurance isn’t based on cause, it’s based on risk. I’ve never burgled anyone. If the number of burglaries increases, it’s not the burglars who face higher premiums.

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  4. Danyl Mclauchlan (1,069 comments) says:

    Insurance isn’t based on cause, it’s based on risk.

    It’s also based on incentives through price signals, this signals people to drive motorcycless less, resulting in less accidents.

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  5. AG (1,827 comments) says:

    DPF:

    “I think there should be some initial support, but when did it happen that ACC funds you until you are 18, if your parent dies in an accident. If your parent drops dead from a heart attack you get nothing, but if it is an “accident” you get ACC. The original scheme was about looking after people temporarily until they could work again – not social welfare.”

    Here’s a potted history of ACC – http://www.acc.co.nz/about-acc/overview-of-acc/introduction-to-acc/ABA00004, which you might care to read before making claims about what ACC was “for”/”not for”. If you do happen to read it, you’ll notice that the original ACC scheme included “funeral costs and lump sum payments to surviving spouses and children in cases of accidental death.” Then in 1992, under (correct me if I’m wrong) a National Government, “lump sum entitlements were replaced by independence allowance (a periodic payment).”

    So the short answer to your question is, ACC became a form of social welfare for dependents under National in 1992.

    As for the comparison with heart attacks, true it makes no sense in the abstract. However, you must remember that ACC was the quid pro quo for giving up the right to sue for negligently inflicted bodily injury. So, if a drunk driver kills the father/mother of a 2 year old child, that child (through his or her guardian) cannot sue the driver for the costs incurred in raising the child to 18 (as would previously have happened under common law). Instead, the cost is “socialised” through ACC. By comparison, where a father/mother who dies from a heart attack, there is no cause of action that has been removed (there’s no-one you could have sued), and so no quid pro quo payout through ACC.

    Bottom line – if you want to remove the payments for dependents under ACC, you need to say what you’ll replace it with. And if that is the right to sue, then you need to face up to all the evidence from the Woodhouse Report onwards that this is inefficient, unfair and good only for lawyers.

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  6. getstaffed (9,186 comments) says:

    Insurance isn’t based on cause, it’s based on risk

    Insurance should be based on risk, and under that definition ACC is a very poor insurer. The risk of a 18 year old crashing a 1000cc motorbike is many, many times that of a 50 year old crashing the same bike. Yet their ACC premiums are the same. No insurer would do that.

    Why not make 3rd party motor vehicle insurance compulsory (a responsibility we take on when putting others’ vehicles at risk by driving) and have the ACC levy calculated as a direct surcharge on that? That way ACC would be simply coat-tailing on the risk profiling model that the insurer applies to the motor vehicle.

    Or… just let me buy by my accident cover from an insurer directly.

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  7. nickb (3,687 comments) says:

    staffed IIRC you mentioned once you were self employed, what were things like in the 90’s when the Nats privatised in? When Labour got back in, was it made mandatory to pay ACC, illegal to have just private insurance etc?

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  8. getstaffed (9,186 comments) says:

    nick – I was a cubicle-farmed employee back then, so wasn’t across the impacts on employers. I’m sure others here will recall the details of the change and reversal.

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  9. toad (3,674 comments) says:

    Looks like an interesting series of blogs starting over at frogblog on how unfair National’s proposed changes to the scheme are. And it’s no wonder they are struggling to get the Maori Party to vote for it. A disproportionately high number of Maori work in high injury risk occupations, so it will be their constituency that suffers most from Smith’s cuts.

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  10. backster (2,171 comments) says:

    The 16 times figure did not include other motorists other than other motorcyclists.. I think it was MacDOCTOR who exxplained how claims for a sprained ankle under ACC averaged over $600 and as high as $900, while non accidental treatment by a GP averaged a little over $50…Compulsory Private insurance from competing companies seems the logical best proposition.

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  11. adc (595 comments) says:

    there’s one point that gets consistently overlooked in arguments about motorcycles.

    The fact you don’t have a car body wrapped around you to protect you. The only thing between your body and a car you hit is your clothing. No crumple zones, no steel, no airbag.

    In the end it makes no difference whose fault an accident may be, the fact is the person on the motorcycle, because they choose that form of transport, is exposing themself to a much much higher risk of injury or death. It’s all very well saying the car driver is usually at fault (even if they aren’t). But who pays the bigger price? It’s like a dinghy arguing with a container ship. Pointless.

    Since ACC is something that pays out for injury, it makes sense that people who choose to expose themselves to an inordinately higher risk of injury (by choosing to ride a motorcycle) should pay more.

    They should also levy rugby and league. I’ve had employees off for months with league injuries. Maybe if they had to take responsibility for their own well-being, they would be more careful.

    Otherwise those of us who are careful to look after ourselves are constantly subsidising reckless people.

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  12. gravedodger (1,566 comments) says:

    As I understood at the introduction of ACC, it was to rescue, revive, repair a victim of an accident so they could return to a job to support themselves without apportioning blame or cause attribution. What we have now is welfare part two with much more money in the hand of the “victim of an accident” and accident has been expanded to ridiculous lengths. Shit happens and now we dont care who caused said accident and therefore we have completely divorced self reliance and responsibility for care from our lifestyle.
    When I was younger and responsible for my share of the security of my family I maintained, at considerable cost, life, accident and medical cover so they were protected in additional to anything the state did. I enjoyed a high risk lifestyle and that was my prudent action taken so I could say with confidence “what the hell” but I know what it cost and there is no way in hell ACC can go close at their premium levels
    This whole mess is just more of the freekin socialists buying power with other peoples money and if the citizens of this bloody country don’t wake up then “you aint seen nothing yet”.

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  13. AG (1,827 comments) says:

    Quick correction – I was wrong in my above post about when the ability of dependents to claim weekly ACC payments was introduced … National’s move in 1992 to introduce the “independence allowance” wasn’t related to it. Mistake admitted and apologies tendered.

    HOWEVER … if you look at the Accident Insurance Act 1998 (National’s attempt to part-privatize ACC), you’ll find exactly the same provision giving dependent children weekly payments until age 18 … see schedule 1, clause 70 (http://legislation.knowledge-basket.co.nz/gpacts/public/text/1998/sc/114sc1.html). So at the very least, National in the 1990s was more than happy to re-legislate this provision into law.

    Furthermore, I am highly dubious about Cameron Slater’s story that sparked DPF’s wee rant – that a child gets the full 80% of her father’s earnings until age 18. Have a look at the Injury Prevention, Rehabilitation, and Compensation Act 2001, schedule 1, clause 70:
    “Weekly compensation for child
    (1) The Corporation is liable to pay weekly compensation to a child of a deceased claimant.
    (2) Compensation payable under this clause is payable from the date of the claimant’s death at the rate of 20%”
    (In other words, dependent children each get weekly payments of 20% of 80% of the parent’s income, not the full 80%)

    SO, either ACC is breaking its own statute by paying the full 80% (unlikely), or Cameron Slater is making shit up.

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  14. Repton (769 comments) says:

    Are there any stats on injury rates broken down by type of car?

    Perhaps we could increase speeding fines and put the extra into the ACC motorists account..

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  15. tvb (4,417 comments) says:

    One thing that makes me annoyed about this is I think Nick Smith is handling this woefully. Really he should be able to get public support for the changes that will save the scheme. Are people suggesting the Government DO NOTHING??? God I wish they would and let us got off to a private insurer. And this stinking piece of junk from the 1970s can tip over.

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  16. petal (706 comments) says:

    “Even under the changes, motorcyclists are being subsidised by other drivers. A motorcyclist is 16 times more likely to be involved in an accident. Not even if half are caused by motorists, that is still eight times more likely.”

    That’s come cool back-of-the-envelope guessing :)

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  17. david (2,557 comments) says:

    So petal, would you prefer $ amounts.
    To quote Mr Judge, Last year bikers contributed $16million in premiums. the cost of bike accidents THAT DID NOT INVOLVE A CAR was $76 million.”
    My recollection might be out by a million or two either way but that was the order of magnitude of the shortfall.

    So quibbling about itty bitty numbers is irrelevant really!

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  18. david (2,557 comments) says:

    getstaffed, sadly, I believe that it is the 50 year olds trying to relive a forgotten youth by getting big bikes (Hogs and Honda Redwings) that are a significant component of the injured. Similarly with over-the-hill rugby and touch players and skateboarders.

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  19. brucehoult (195 comments) says:

    This new motorcycle levy is grossly unfair.

    Either every vehicle user should pay the same, or else everyone should pay an amount tailored to their individual risk.

    As someone who has been riding motorcycles on the road for 31 years and about 400,000 km without a single ACC claim, why should I have to pay for someone who gets a bike way beyond their skill and experience level (and in fact one that *I* would never consider owning) and munters themselves?

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  20. peterwn (3,271 comments) says:

    Motorbikes and power cycles – Intuition would seem to indicate that for low cc machines (up to 150cc), the riders suffer far more accidents than they cause, the 500% increase for 50cc and less seems rather dubious especially for the Christchurch style which is no more than a push bike with little motor.

    Death benefit – in pre ACC days if a worker is killed through employer’s or workmate’s negligence, the family could sue the employer who was obliged to have appropriate insurance. This necessarily had to be a lump sum. Therefore a ACC death benefit to help the family of a deceased is quite appropriate – this is core to the ACC ‘social contract’. Whether it should be 80% of wages until youngest child turns 18 would the main issue. The ‘present value’ of the ACC payments would probably greatly exceed the pre ACC lump sum (even before the lawyer’s cut). Perhaps the payments could be capped to five years (80% wages) with the option of 50% wages for 10 years. It should not be a lump sum – the temptation to squander it may be too great.

    Seasonal workers – For casual workers including retired people who do some consulting there is a danger that they on average may not receive in aggregate the same benefit as full time workers, ie ACC levies merely become to some extent a deadweight tax on these people. IMO over 65’s who are self employed should be able to ‘opt out’ of most of ACC since they can generally bear loss of work income with no problem.

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  21. getstaffed (9,186 comments) says:

    david – Not so sure of that, but I take your point.

    With respect to motor vehicle levies, I contend that the risk assessment, rating and fee collection scheme is completely askew. There’s nothing about track record (past accident history being a very good indicator of future events) and then there’s people with 5 motorbikes simultaneously paying 5x their actual risk.

    Why is the vehicle rated for ACC rather than the driver? Is it fair that the rider of un unregistered trail bike receives ACC for any injury sustained when they’re not paying a levy, while a road rider with 30 years of clear record is the one contributing to the fund?

    It’s time for a major overhaul, to purge the ill formed ‘part-taxation part-welfare’ aspects from the scheme and get it back to its risk insurance and rehabilitation roots.

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  22. Sean (301 comments) says:

    I have more than one over 600 cc motorcycle and National won’t be getting my vote if this goes ahead.

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  23. wreck1080 (3,905 comments) says:

    If labour were in power today, they would increase ACC entitlement to include all GP visits . At the same time, they’d reduce the Car premiums again.

    This is literally how stupid labour were back then.

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  24. annie (539 comments) says:

    Several significant areas seem to have been overlooked, for instance the nonsense about replacing damaged clothing, some of the lump sum payment provisions seem to have been regarded as too politically volatile to address.

    Also, ACC has been pretty slack in the past at following up GP concerns regarding the veracity of claimants’ stories – there is a space on the ACC forms for the GP to tick if they believe a review is indicated. I’ve never seen it picked up and acted on by ACC.

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  25. malcolm (1,952 comments) says:

    Espiner makes a point about motorcycles using less fuel than cars. This is true for smaller bikes, but it’s surprising how a larger bike (say 600 or 750 cc) doesn’t get much better fuel economy than a small car.

    Add to this the much higher depreciation for a motorcycle and in most cases a decent size motorcycle is more expensive and less practical transport than a small car.

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  26. CharlieBrown (1,011 comments) says:

    If my health insurance company charged me over $1000 a year if I was earning $45000 I would not take the insurance up. I struggle to see how ACC can justify such rediculous charges. It makes me wonder how much money we really are paying to ACC, especially if you take into account that my employer is also paying ACC for my work time cover.

    This is why ACC needs to be privatised, and opened up to competition. If its government policy that we all must get Accident Insurance then so be it, but let private enterprize do it. This way it will not be open to the tinkering and abuse that politicians are prone to doing.

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  27. louie (96 comments) says:

    Espiner is a disgrace. No mention in the Press of any role of the previous Govt in the ACC mess, not even the ‘is it really Labour’s fault …’ point. I’ve never understood why DPF and others rate him in the centre politically. It seems to me he is well to the left of the spectrum. Like most left wing journalists he was obsessed with Brash long after it made sense from a news point. Earlier this year he (Espiner, not Brash) went on and on and on about Christine Rankin for week after week. I suspect his editor must have called halt to the obsessive comments.

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  28. jackp (668 comments) says:

    Gravedodger, I am curious, what were your premiums? I am from the states and believe me, you folks don’t want to get into the law suits. Everyone now pays huge premiums because everyone sues each other. I have a mate who is a personal liability lawyer, and he invited me for lunch with his lawyers friends. My gosh, the conversation was about payouts in the millions over stupid accidents that the victim should have been more responsible. But when there is “deep pockets” like a city having insurance, they pay out and up the taxes. By the way, after having lunch with these guys, I made a solemn promise never to eat with lawyers again. They are miserable creatures. People, please, don’t get into lawsuits. That is not the answer. I like what Rodney Hide said, lower the rates and bring in some competition. Why not?

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  29. calendar girl (1,232 comments) says:

    Agree with you, louie. Espiner is a lightweight political commentator who chooses his subject matter very carefully to avoid any risk of bringing too much aggravation to the left of the political spectrum. DPF treats him with far too much “peer” respect.

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  30. V (719 comments) says:

    think there should be some initial support, but when did it happen that ACC funds you until you are 18, if your parent dies in an accident. If your parent drops dead from a heart attack you get nothing, but if it is an “accident” you get ACC. The original scheme was about looking after people temporarily until they could work again – not social welfare

    Well lets see now, maybe it’s because the imposition of ACC removes peoples ability to sue? Thus what are you going to do in the case of an accident caused by the negligence of others, take the ACC or risk trying a court case where even if you win the weak justice system in this country is likely to award you the princely sum of $20 000, for the life of a parent !?!

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  31. cauld (47 comments) says:

    “I think there should be some initial support, but when did it happen that ACC funds you until you are 18, if your parent dies in an accident. If your parent drops dead from a heart attack you get nothing, but if it is an “accident” you get ACC. The original scheme was about looking after people temporarily until they could work again – not social welfare.”

    This was a really silly comment.

    I’d encouage you to have a look at Pararaph 11 of the summary of the Woodhouse Report
    http://www.library.auckland.ac.nz/data/woodhouse/woodhouse1c.pdf

    It absolutey contemplates compensation approaching common law damages for serious injury.

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  32. Clint Heine (1,570 comments) says:

    The “old” National helped put ACC right before, thanks to ACT support and Jenny (our first Woman PM) setting the agenda. Will John Keys National Party have the balls to do the same and bring us to 1st world status? Frankly, this issue itself could be the difference between National and Labour because at the moment it is difficult to tell the difference!

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