You often hear people bemoaning that a NZ company has been bought by a foreign company, but many of them would never consider buying shares themselves. Or if you suggest that they too could own some of that company they will say something about being “ripped off by men in suits”.

But as is often the case, their general point does have some validity. Plenty of successful NZ companies have been bought by foreign concerns. Part of this is inevitable because of NZ’s small size and part of it is because NZ is relatively poor and getting poorer. And partly that is because NZ’er don’t invest in NZ companies.

Manor? Manner.

[DPF: I said the Government broke the Public Finance Act. Treasury is part of the Government and Ministers are responsible for their departments]

But back to ACC. Yeah my comment about NZ owned was sloppy. I should have said that in a good decade insurance companies are a licence to print money so it’s not necessarily be a bad thing that any benefit of a well run scheme stays in NZ (via reduced premiums etc). There are also related advantages of ACC, e.g. you cannot sue and thus you don’t get a society moulded around the fear of litigation, as is the case in the US.

My main point is that insurance is a simple business at heart and there’s no reason why ACC cannot be run well in a hands-off manor.

I agree totally with the silliness of “NZ owned”. Most people who talk about this as a bad thing have probably never bought a share in their lives.

I understand that it shouldn’t be hard, but it doesn’t follow that therefore the govt cannot screw it up. The political process is a large part of what creates the screw up – for example, deciding to run it as a pay as you go scheme, rather than fully funding.

How does the ownership of the insurance companies make any difference to whether it is a good idea to have private involvement? This is something I’m seeing more and more around the blogs – some thought that whether something is NZ owned or not makes a difference. I think it is showing significant gaps in economic understanding.

So far as I can tell, the argument here is that somehow if NZ owned the profits would stay in NZ. But that is shallow thinking. The NZ economy has a certain amount of “NZ owned” capital available. Whether that capital is invested in an insurance company, or invested in some other enterprise, it will generate a return. Presumably those who own that capital are choosing to invest it in the place where they think they will get the best return. So if we asked them to instead invest that capital in an insurance company in NZ, they’d either ask for a higher rate of return than the market suggests should be needed, or they’ll lose money by getting a lower rate of return than what they’d otherwise invest in.

It isn’t the place of government to second guess that by attempting to force individuals (through the tax system) to invest in something they otherwise wouldn’t have invested in.

What might be the place of government would be to rebalance the incentives between different asset classes. So, for example, people might be more inclined to invest in insurance companies rather than rental property. I think that’s one of the things that the current taxation review is looking at.

Which part of Accident Compensation Corporation says its an insurance operation?

Wouldn’t single-provider imply government?

Yeah, I was meaning government run, but run hands-off. Like Transpower.

I agree that government is not good at running businesses. But the core insurance part of ACC is a simple business. Much larger insurance companies (where I’ve worked) might only have a dozen actuaries, a dozen underwriters and some investment people. The treatments, evaluations etc are all done by contractors (as is the case with most private insurance).

I don’t have anything in particular against private insurance, but there are some advantages to a single provider. Especially in the case of NZ where there are really no NZ owned insurance companies. Also the state invariable gets involved in insurance anyway via some sort of insurance guarantee scheme.

I think that this “provision for future costs” thing is poorly explained by the media, so people are getting the impression that there is somehow an expectation that they’re being required to make provision for future accidents, not the future costs of current accidents.

If I were to run an investment scheme where I used the funds inflow from new investors to pay returns to old investors, I would be up before the courts for running a ponzi scheme. Because you’re running a scheme that isn’t long-term sustainable, and you’re counting on some magic in the future to make it all come good. It’s exactly the same when the premium inflow in an insurance company isn’t sufficient to cover the claims that eventuate in that year. You’re running an unsustainable scheme, and hoping for some event in the future to make it all come good. In the case of Labour, I think the event in the future was the election of a National govt, who could be made to take the blame for the fact that Labour were running a ponzi scheme.

December 7th, 2009 at 10:26 am
Ah, the old lefty mortgage argument from MNIJ that just shows more idiocy. Yes, you pay your mortgage off over time but you try not to add another $10,000 to it every year because you know that eventually you won’t be able to pay for it. At least with the mortgage it generally won’t get bad enough that your grandchildren have to pay.

Well, not every year, but I do increase my mortgage as I buy another rental, thus adding to the debt that must be paid at some time in the future. The assumption is that my income will continue to grow to fund each new liabilty.

The main reason that we cannot have a good single-provider insurance scheme is because it is run by government. And very little that is run by government ever works out well. They just aren’t geared up to run businesses. I’ll readily accept that many businesses are also incompetent. But so long as you have the option to move to another provider, I’m not concerned about that. If the business is too incompetent, they won’t be in business any more.

There is a reason, and that is a majority of voters who are brainwashed into thinking only government can do that.

* made up fact that may or may not be true

There are so may reasons. All political but none rational.

I’m sure a lot politicians would love to have ACC out of their laps. Particularly when it’s in a mess. After all, they gave up the ability to set interest rates and that had clear political advantages.

It’s true that even an SOE still has political influence brought to bear on it. Witness Helen Clark’s interference in Transpower’s new 400 kV line to Auckland. But politicians still weld power over private insurance companies. There’s loads of laws in US which force insurance companies to cover people they wouldn’t otherwise take on.

There’s no perfect system but there is no reason why NZ can’t have a good single-provider insurance scheme for personal injury.

I mean in the one instance the rape theft and thuggery that would no doubt occur in the case of what the amoral left would be doing if law enforcement suddenly failed in NZ, and in the second instance , the need of free men to deal with tyrants who would enslave them.

Red, I think you pull more tits than a Mackenzie dairy farmer would like to. You can’t be serious, so I’ll take this as hilarious.

There are so may reasons. All political but none rational.

No I don’t. I mean in the one instance the rape theft and thuggery that would no doubt occur in the case of what the amoral left would be doing if law enforcement suddenly failed in NZ, and in the second instance , the need of free men to deal with tyrants who would enslave them.

As you well know you deceitful smearing coward.

They never will be by government. Especially when re-election depends upon sustaining the delusion.