To say that ACC accounts is in a mess would be to pre-support that ACC needs to be pre-funded. I put it to you that this accounting policy change made by the most recent Labour Government is not in the best interests of ACC or those it aims to protect, and that there is in fact nothing wrong with the ACC accounts.
Let me direct your attention to the University of Auckland’s business school which analyses the case for pre-funding, and comes to the conclusion that there is no need for it.
http://www.business.auckland.ac.nz/P...Ffinal1811.pdf
In an interview with Owen Woodhouse, frequently considered to be the founder of ACC due to his significant input into its creation, Owen Woodhouse suggested that having everyone pay for the care off all those injured in a calendar year for all the care they would need for the rest of their life would be like having someone turn up to school and on their very first day asking them for payment for the entire rest of the their education. How could they possible know what that was going to cost?
Pre-funding is most commonly used in the insurance industry, because in insurance you do need to account for the cost of future claims made by current customers. However ACC is not an insurance scheme. It never has been. It is a compensation scheme that was created to replace the Works Compensation Act. Prior to ACC there was significant incentive for insurance companies to not pay out on claims, which frequently resulted in very expensive court action.
The Woodhouse report (Woodhouse himself having been a supreme court justice) noted that often substantial amounts of compensation were used up in legal fees.
So I put it to the AA that it should not be so much backing a change in levies, but a return to the original Woodhouse principles.
Once you drop the pretence of ACC being insurance, and accept (as per the current legislation) that it is a compensation scheme, then you comes back to the original Woodhouse principles that the community (aka, all users) should contribute equally. This is because there is no “risk” in a no-fault scheme. All that merely needs to be done is to collect sufficient funds from everyone to cover the compensation that is required to be paid out (plus a reserve so that the scheme has a buffer in bad times).
I note you make reference that the Police claim 85% of motorcyclists where at fault in accidents. ACC’s only figures are closer to 46%, but ACC only consider injury accidents that require an ACC pay out. If you were to try and attribute risk, and I’m not suggesting you do, then it is clear car owners should be paying for around 54% of the cost of motorcycle accidents.
However, this is not about car or motorcycle users, it’s not about pitching one group of ACC users against another – it’s about the premise that pre-funding is required. ACC currently has an operating surplus of around $900m – it most certainly is not in any financial crisis. The much publicised crisis is nothing more than a PR exercise based around accounting principles.
The AA has generated a lot of distrust among the motorcycling fraternity. I would have to say a lot of AA members have cancelled their insurance and membership over this issue. Having been a long term member of the AA I would like to take a different tact, which I’ll be encouraging other members to adopt.
I intend to get a large group of motorcycling members to attend their district meetings, and make our desires known to the local district councillors. We also intend to quiz those standing for re-election, and I feel we’ll hold a big enough voting block to be able to affect the outcome of any voting, should more people stand for election than seats available.
I’ll also be re-enforcing the very first rule in the AA’s constitution:
“To promote an organisation or association of persons who own motor vehicles or are otherwise interested in motoring.”
So as senior policy analyst, I encourage you to support those interested in motoring, and a return to the original Woodhouse principles. They are as valid today as when the original study was done.
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