Another Nixter Smith curiosity

**dpex** · 2nd December 2009, 19:33

On Monday night Smith made two really quite curious assertions.

The first being; he asserted that ACC had, in fact, three funding strands.

That's news to me, but maybe one of you knows different.

However, I've written to John Judge to have him confirm or deny these assertions.

He asserted there was in fact:-

1. Road-user levies; covering road-related ACC claims.
2. Employee levies; covering work-related ACC claims.
3. From the general account; covering the other 82% of all ACC claims.

It is the last stream which fascinates me because I suspect Smith was making up as he went along.

Consider the ramifications of item three stream. 82% of ACC claims are made by persons not engaged in work or road-use...at least not registered road use' yet they pay nothing for the benefit?

Of course, were this true he would have to include tourists in this stream.

The second was;

He asserted ACC had to be funded into the future of claims.

Excuse me? How the devil does any person calculate a future cost of a particular primary claim? Nostradamus? God? The Pope...being in regular contact, and all?

What utter bullshit. Even insurance companies can't play that game. The best their actuaries can do is assess risk as it happens to the individual, in the now. They set a base premium for a newly insured, then sit back and wait. If said insured makes it through a year without a claim they get a discount for the following year.

But let's take the next leg of this outrageous posit (ergo, ACC being FULLY funded into the future). Why are the same actuarial methods not applied to eduction or health, or transport?

When I asked him to explain this contradiction he suddenly found someone further back, behind me with a seriously genuine question.

So maybe this is yet another question to pose to back benchers.

The theme, when writing to back benchers must always be, "I'm in your electorate and I don't like what you lot are doing."

Ergo, work hard for change or I'll vote for the other guys.

Believe me. Back benchers may be just so much cannon fodder, but they have a voice.

Go at them with every annoyance you can think of.

**paturoa** · 2nd December 2009, 19:44

Has anyone asked TV3 for the full tape of the meeting? I'm very interested in the bit where he was talking about doing deals with the other parties. I'd really like to hear the bit where, it's my recollection that he said that he'd done a deal with ACT over ACC.

**Mully** · 2nd December 2009, 21:03

Originally Posted by dpex

The second was;

He asserted ACC had to be funded into the future of claims.

Excuse me? How the devil does any person calculate a future cost of a particular primary claim? Nostradamus? God? The Pope...being in regular contact, and all?

What utter bullshit. Even insurance companies can't play that game. The best their actuaries can do is assess risk as it happens to the individual, in the now. They set a base premium for a newly insured, then sit back and wait. If said insured makes it through a year without a claim they get a discount for the following year.

But let's take the next leg of this outrageous posit (ergo, ACC being FULLY funded into the future). Why are the same actuarial methods not applied to eduction or health, or transport?

When I asked him to explain this contradiction he suddenly found someone further back, behind me with a seriously genuine question.

Not that ACC is an insurance company (*ahem*) but insurance companies do similar to that. Not so much car insurance, but income protection for example takes your age and and any risky activities into account (i.e. you're 25 years old, earning $80K and bungee jump regularly) - they calculate the value of your income they have to pay for the next 40 years, plus the "loss" they take on not having your premiums to invest, mix some inflation into the mix and pop up a number.

That's (IMHO), where most of this mess started - ACC chucked an accounting method change into the mix and came up with a $13 Billion liability account. (FWIW, that number is probably accurate to within a few percent - but that's neither here nor there)

Good work on keeping your foot on the throat. I've been making all my local mates write to our MP (Paula Bennet, Minister and marginal National seat)....

**NONONO** · 2nd December 2009, 21:21

No it is an insurance company.
Nick was very clear on that point on Monday night.

**Ixion** · 2nd December 2009, 22:04

Originally Posted by dpex

On Monday night Smith made two really quite curious assertions.

The first being; he asserted that ACC had, in fact, three funding strands.

That's news to me, but maybe one of you knows different.

However, I've written to John Judge to have him confirm or deny these assertions.

He asserted there was in fact:-

1. Road-user levies; covering road-related ACC claims.
2. Employee levies; covering work-related ACC claims.
3. From the general account; covering the other 82% of all ACC claims.

It is the last stream which fascinates me because I suspect Smith was making up as he went along.

Consider the ramifications of item three stream. 82% of ACC claims are made by persons not engaged in work or road-use...at least not registered road use' yet they pay nothing for the benefit?

Of course, were this true he would have to include tourists in this stream.

More or less correct. There's actually four , with a few sub accounts.

Employer - covers cost of work accidents. Funded by the infamous employer levy, the one that they use to justify having us as a separate classification, because it is risk based.
Employee - covers non road accidents by employed persons. Funded by the deduction that IRD make from your paypacket each week/month. What gets taken out has TWO parts , tax and ACC levy
Road User - covers cost of accidents on a road. Funded by a levy on fuel and a levy on vehicles
General - funded from general taxation. Covers non road accidents by non employed persons

The Nickster was basically right

The second was;

He asserted ACC had to be funded into the future of claims.

Excuse me? How the devil does any person calculate a future cost of a particular primary claim? Nostradamus? God? The Pope...being in regular contact, and all?

.

Sort of. Depends who you listen to

Insurance companies have to , sort of, fully fund liabilities. That's because an insurance company can, in theory, go out of business at any time. If you took out an annuity with an insurance company, whereby they agreed to pay you a pension for the next 20 years, and they wanted to fund it on a pay as you go basis, you'd be in the shit if the insurance company closed its doors in year 5. No money coming in to fund the liability.

So for an insurance company, an unfunded liability is a biggish no-no. Which said , full funding isn't always a reality

The difference with education etc is that the government isn't a company. It's a sovereign entity. So unless we get invaded , or there's a coup d'etat, it can't go out of business.

At present ACC is a Crown Entity. National would like to privatise it. But, they can't do that if it has unfunded liabilities.

If they sell of the bits of ACC, they can't keep collecting levies. What then happens to the folk who are permenatly disabled and relying on theose ACC payments to live on. No levies means no money coming in to pay them.

So, before they can privatise any of the bits, they have to have it fully funded. Then they can sell of the business, there's money in the bank to keep paying out on the liabilities as long as needed.

The Nickster is sort of right. If you accpet that ACC should be privatised.

**Mully** · 3rd December 2009, 07:57

Originally Posted by Ixion

So unless we get invaded , or there's a coup d'etat, it can't go out of business.

Are you suggesting, Mr Ixion?

It'd get more attention than a Bikoi......

**Ixion** · 3rd December 2009, 08:10

Well, I tried to organise a tank for the BIKEOI.

**Conquiztador** · 3rd December 2009, 08:13

Originally Posted by Mully

Are you suggesting, Mr Ixion?

It'd get more attention than a Bikoi......

I'm in! Imagine the biker parties when we are in charge of the place...

**RiderInBlack** · 3rd December 2009, 13:30

Originally Posted by Ixion

Well, I tried to organise a tank for the BIKEOI.

Would love ta see the Good Bastards Tank there on the next one.

**avgas** · 3rd December 2009, 14:00

First point:
This is why I feel that the charges need to be a level playing field thing - like and extra 0.5% on top of GST. Remember those ACC adds of injuries caused in the home - well where is the ACC charge on household stuff?
If they cant make it even - they need to make ACC private so it learns what the real world is like.
FYI : Southern Cross don't rip me off anywhere near as bad as ACC CURRENTLY do. So I have no hope for ACC in the future. When in Aussie i noticed that the average medicare setup was around $1000 p/a.
How much do we pay (total) for ACC here - a lot more than that I suspect.

Your second Point:
ACC has to plan for future claim funds. Its quite simple - take existing accounts and estimate total recovery / payout time, multiply fund by that figure and viola total required in bank to cover future expenses.
Imagine it like this - you boss will now pay you large ammounts of money, but will not tell you when you will be unable to work. You stock pile an ammount of money to get you by for the next 12 months. What is that figure? how did you calculate it......same thing different pretext