In 2001, Australian insurance giant HIH collapsed with debts of around A$5 billion, caused by gross mismanagement, including charging too little for premiums and failing to put enough aside for claims.
The Australian authorities took the matter seriously, including Prime Minister John Howard, who established a royal commission. The company’s principals were jailed for offences including knowingly disseminating false information, filing false financial statements, being intentionally dishonest and failing to discharge their duties in good faith and in the best interests of the company.
I think I know where Matthew is going with this.
This week, New Zealand’s biggest insurer, ACC, reported a NZ$4.8 billion loss on top of a NZ$2.4 billion loss the previous year.
Like HIH, ACC’s crisis was knowingly hidden from the public. The Treasury’s Pre-Election Economic and Fiscal Update, signed by then finance minister Michael Cullen, did not disclose it, a failure subsequently found by an independent inquiry to have breached the Public Finance Act.
Yes my suspicions are correct.
Even worse were the public statements of then-ACC minister Maryan Street.
On June 26, 2008, ACC was apparently strong enough for Ms Street to announce that 400,000 casual and seasonal workers would get improved cover.
On September 11, she had enough confidence in the company’s finances to announce a re-elected Labour government would cut the motor vehicle levy from $254 to $203.
Three weeks later, and just five weeks before the election, Ms Street was at it again, announcing an expansion of ACC entitlements to people over 65.
The most charitable interpretation is that the former university academic might suffer from some advanced form of oniomania that makes her believe that, despite ballooning liabilities and a global financial crisis, it was possible to keep buying new services from ACC, while cutting its revenue, and expect it to remain viable. Alternatively, perhaps she was just telling lies in the heat of a close election campaign.
I had to look up what oniomania is!
Far from turning itself in to the Serious Fraud Office, Labour now has the audacity to launch a new narrative that accuses ACC Minister Nick Smith and ACC chairman John Judge of establishing some kind of conspiracy to privatise the scheme.
Audacity is the nicest word for it. I still think it is a pity the Government did not demand prosecutions for the breach of the Public Finance Act!