Riffing on an idea: ACC full funding model

[rainman]

Bear with me, I'm still thinking his through...

Has anyone managed to find a clear definition of the methodology ACC uses to estimate it's future funding liability? A search of their website points to the Act, which does not define in detail how to calculate the liability (no surprise there).

My reasoning is as follows:

• ACC claim they have to up the premiums to deal to the forecast future liability by 2019 (one of the reasons, anyway).
• Estimating the liability involves a model with a bunch of assumptions.
• One of these will be total number of km travelled, as that's a reasonably obvious determinant of risk.
• Km travelled is determined by a number of factors, incl. population, but also price of fuel
• Over the planning window (40 years?) this is going to change, significantly (*)
• Last time fuel went up, traffic dropped sharply...
• ...meaning ACC motor vehicle risk exposure dropped too

(*) Even if you argue against a short term peak in oil supply there is no way to defend a long term absence of a peak - even the cornucopians say 2030 or sooner.

If they're depending on the Treasury numbers for the price of oil they will have it dead wrong, and be overestimating the future risk. I'm working on the assumption that premiums will never go down, even if it becomes obvious that they have got it wrong. Not common for government to give money back!

Of course in the event of a near term peak in oil there would be other factors that might affect ACC, but I'm focussing only on the fairness of pinging the motoring account at this stage.

a) Does this logic make any sense at all?
b) Has anyone got the ACC to explain their future funding calculation model?

I will ask them if the answer to b) is no.

[flyingcrocodile46]

a) Does this logic make any sense at all?
b) Has anyone got the ACC to explain their future funding calculation model?

I will ask them if the answer to b) is no.

a) Yeah but the factors used probably aren't that logical

b) Not that I'm aware of, Good luck

Ixion may be in a better position to answer b)

[mikeey01]

Has anyone managed to find a clear definition of the methodology ACC uses to estimate it's future funding liability?

I reckon it's either a dart board or pub coaster throwing to get their numbers.

[avgas]

otherwise its not a balanced argument - its a witch hunt.

I imagine ACC would trend the last 5 years data, look at what their claims would be - and extended those payments for the minimum 5 years.
I do understand where your coming from - but look on the other side of the coin.
How would you feel if you paid the same fee every time....but then they ran out of money to sort people out.

I rely on a builder to build a house,
and accountant to check the statements
and ACC's budgeters to allocate enough funds so no one misses out.

Be more concerned about where the money goes - rather than why it is saved.

[rainman]

I rely on ... ACC's budgeters to allocate enough funds so no one misses out.

I work on the principle "Trust, but check". Particularly when the buggers are very unlikely to give me a refund if they're wrong.

And the government (this and the last) have got oil very, very wrong before.

[Ixion]

The NZ Society of Actuaries set the rules. I believe that they follow the Australian actuarial standards. Root around on this site, that should get you started, then if you have a spare lifetinme, and an enormously high boredom quotient, you can probably figure the process out.

ACC don't invent it, there are international rules about these things, which are followed by all insurance companies , risk assessors and so on.

[rainman]

The NZ Society of Actuaries set the rules. I believe that they follow the Australian actuarial standards. Root around on this site, that should get you started, then if you have a spare lifetinme, and an enormously high boredom quotient, you can probably figure the process out.

Ta. Should have guessed that: in an earlier life I spent a lot of time reading APRA stuff.

I'll also write to ACC and ask more specific questions, and will post here if I find out anything useful.

[p.dath]

I can't imagine how you can determine the future cost of treating people injured today.

For example, what new medical treatments will be developed over the next 50 years of a potential claimants life?
What if in 5 years a treatment is discovered that fully restores the persons health and then can return to full time employment?

What about if computers are increasing used for medical diagnosis, and humans are used less, bringing down the cost?

What if like call centres, diagnosis is outsourced to cheaper countries like China, because medical professionals in NZ are two expensive?


There are just so many variables I don't know how they could possibly come up with a number.


I agree with the comment by Owen Woodhouse. Fully funding ACC is like asking you to pay for 100% of your education on the first day you attend school.