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Experts: National lying over ACC

Written By: - Date published: 11:27 am, March 12th, 2009 - 46 comments
Categories: ACC, national/act government, privatisation, spin - Tags: , , ,

The wheels are starting to come off National’s PR campaign to undermine ACC as more and more people notice the gap between their spin and the reality.

This morning’s Dom Post has an interesting article [offline*] where the managing director of actuaries Eriksen & Associates refutes Nick Smith’s lies about the “cost blowout” and the corporation being insolvent.

Here’s the money quote from John Eriksen:

“All this talk of liabilities being blown out is complete nonsense. It’s ill-founded scaremongering, which, given the current economic picture, is the last thing people need to be told.

“All this nonsense is easily explained. Assets have basically dropped in value, helped in no small part by the collapse of the markets. But the ACC has also taken a hit on the liabilities side. So, on paper the losses have ballooned, when in reality there’s nothing wrong with it.”

Eriksen also added that new international accounting standards had made a difference because the new discount rates had added billions of dollars to ACC’s liabilities, when in truth that might not be the case.

If Nick Smith were honest he’d apologise for lying to the public, reinstate Ross Wilson and cancel his plans to cut services and hand ACC over to the private insurance industry. But somehow I can’t see that happening.

* Business section, C1.

46 comments on “Experts: National lying over ACC ”

  1. IrishBill 1

    He was still peddling the “blow-out” line on morning report today. The man has no shame.

  2. roger nome 2

    Hah – no surprises here. I hope David Farrar over at kiwiblog posts an apology to his readers for his deceptive posts about the ACC “cost blow-out” as well. Somehow i can’t see that happening either though.

  3. Kevin Welsh 3

    This is all well and good, but do you seriously expect the MSM to give this any traction?

    • IrishBill 3.1

      From Christchurch Press Political Editor Colin Espiner:

      Rather than inventing a financial crisis at ACC, just admit there’s too many unionists on the board and you want to take the corporation in a different direction.

      • Kevin Welsh 3.1.1

        And from Colin Espiner no doubt. Duncan Garner latching on to this like a pit bull? Maybe if it was pie flavoured.

      • BLiP 3.1.2

        Colin Espiner:

        On this one, personally I’m with Smith.

  4. tsmithfield 4

    So far as lies about ACC goes, what about Labour’s promise before the election to reduce ACC charges? Given the knowledge they had prior to the election, it is hard to see this promise as nothing other than a blatant lie.

    • Kevin Welsh 4.1

      Did you even READ the above story?

      Or do you just automatically go straight to the schoolyard whine?

    • Matthew Pilott 4.2

      As I was saying to Tim Ellis yesterday, you could easily reduce levies. You’d only increase them if you’re National and you want to make people dislike ACC by making them fund more of ACC now than is required to make up for an asset-based non-operational shortfall.

  5. cha 5

    Heh, pointed Farrar to the article this morning, so far no reply.

  6. tsmithfield 6

    Kevin “Did you even READ the above story? Or do you just automatically go straight to the schoolyard whine?”

    So, do you deny that Labour told lies about ACC then?

    So far as the article is concerned, I heard Tony Joyce commenting on this on ZB the other day. He agreed that overseas investments HAD dropped significantly. However, he also made the good point that costs had risen 60% in recent times, and therefore, the losses in the investments meant that the increased costs were not affordable over the long term.

    • Ari 6.1

      Sadly, opposition promises that can’t be easily met can’t really be evaluated as to whether they’re “lies” or not, as you need to know what position the government as a whole would be in if their policies were more generally implemented, and whether this would give them the room to meet their promises.

      Seeing as we have a National/Act/United/Maori government, those are the promises we can evaluate.

    • BLiP 6.2

      Has Joyce got the official statistics to back this up . . . hmmm

    • Kevin Welsh 6.3

      “All this talk of liabilities being blown out is complete nonsense. It’s ill-founded scaremongering, which, given the current economic picture, is the last thing people need to be told.

      In case you missed it the first time. Pretty much makes the rest of your argument redundant.

  7. tsmithfield 7

    Ari “Sadly, opposition promises that can’t be easily met…”

    Has to be the understatement of the year given the actual state of ACC that Labour was aware of when making the promise! Anyway, Labour was in government when they promised to cut ACC levies, not in opposition as you suggest.

    • Ari 7.1

      Why are we still even talking about the last term of government? Yes, it’s bad they didn’t meet their promises, but given that they improved cover and efficiency I doubt you’re going to hear too many complaints on Labour’s record with ACC, especially after what National’s up to.

  8. Tim Ellis 8

    It is not true that ACC’s problem lies simply with a fall in asset values and accounting changes.

    In several areas ACC treatment costs have risen to alarming levels. Physiotherapy is a key example. The move to free physiotherapy visits has seen costs rise from $58 million a year in 2004 to a projected $225 million a year in the next two years. Those costs were not properly forecast by ACC.

    ACC performance indicators including rehabilitation rates, costs per treatment, costs per entitlement claim, return to work rates, and the number of long term claims have all worsened significantly over the last three years. This is the key driver of increased cost and liabilities in ACC, independent of changed accounting standards and income from ACC assets.

    Labour went into the election knowing that to implement a fully-funded model by 2014, as has been provided for in legislation since 1998, would require a dramatic rise in ACC levies across the board, in order to fund existing entitlements. They knew that in order to fund existing liabilities would also require major levy increases in most instances, and major government injections of cash in the case of the non-Earners’ account. They sat on these figures and then promised a reduction in ACC levies.

    If you want a case of true lying about ACC, you can look no further than Maryan Street and Michael Cullen.

    There seems to be a meme going around about how this is some big conspiracy within National to talk down ACC to shore it up for privatisation. That is just nonsense. ACC can’t be privatised while retaining the no-fault 24-hour cover that are at the core of the scheme’s principles. Labour knows this yet continues to raise the red herring of privatisation to distract from its own dishonesty over ACC.

    • BLiP 8.1

      They’ll privatise those chunks of ACC that Key’s mates can profit from and leave the rest to be funded by the tax payer. Its all about privatising profit and socialising debt. They tried it last time they were in Govetnment. Have a read of “The Commercialisation of New Zealand” if you want the details.

      • Tim Ellis 8.1.1

        BLiP, which chunks of ACC are you referring to?

        There is no cross-subsidisation of ACC accounts. The only account that can be opened to competition is the Employers’ Account. At present it only collects enough levies to pay for existing costs and fully-fund costs of injuries.

        The taxpayer doesn’t currently extract a profit from the Employers’ account. How do you mean “privatising profit”, when the Employers’ Account doesn’t currently deliver a profit?

        • DeeDub

          Jeez, Tim how disingenuous!?!

          You know very well HOW they will take the Employers account and make it profitable. Or do you not understand how the insurance industry works?

        • Ari

          Simple, keep all the costly parts in the ACC program, and all the profitable bits will be privatised off while insurers queue to buy them up. Then when costs of ACC still stay huge they have an excuse to snip the agency back or even turn it into SOE that acts like a private insurer. Yuck.

          National is making a poorly-hidden grab at the idea of socialised insurance instead of just being honest and open about its policies.

          • Tim Ellis

            Ari, what do you mean, “profitable bits”?

            There aren’t any profitable bits of ACC. None of the ACC accounts is in surplus. None of them cross-subsidise any of the accounts. None of the risk categories cross-subsidise each other.

            I hear this time and time again, along with the “National just wants to privatise all it can”, but I’m afraid even by scratching a little bit into the argument it just doesn’t stack up.

    • Matthew Pilott 8.2

      We went over this fairly comprehensively yesterday, Tim, and there’s still no evidence that levies would need to go up. I’m not sure what you consider an ‘alarming’ level of anything, nor if it is an objective term or if you’re just being…alarmist.. Where is the evidence that entitlements and payments require an increasing levy?

      I doubt there is any evidence, becaue if there was surely Nick Smith would give it to us instead of lying by saying that to fund ACC we’d need to increase levies by hundreds of dollars (pretending that a small sohrtfall is in fact $20 billion or whatever untruthful level he stated on National TV), when that would only serve to cover for paper losses in the ACC fund. Labour knew that, even if you refuse to accept it, Tim, and make your own assumptions in lieu of evidence.

      The reason for this ‘meme going around about how this is some big conspiracy within National to talk down ACC to shore it up for privatisation’, as I explained to you yesterday is that Nick Smith is blatantly lying about the real costs necessary to fund ACC. Smith and National are making New Zealanders pay more for ACC because National wants people to dislike it – there is no operational requirement to increase levies.

      You said yesterday that National have said they support the core principles of ACC – their actions show otherwise, and very clearly. As I also said yesterday – I believe National are lying when they support those principles, which is why you can’t point to a single National MP who would prefer ACC to a private insurance system, or the right to sue.

      They are needlessly and callously undermining the system, and there’s only one good reason for that – unless you want to give me another reason why we’re all going to pay increased levies when we don’t need to.

      • Tim Ellis 8.2.1

        Matthew wrote:

        We went over this fairly comprehensively yesterday, Tim, and there’s still no evidence that levies would need to go up. I’m not sure what you consider an ‘alarming’ level of anything, nor if it is an objective term or if you’re just being alarmist.. Where is the evidence that entitlements and payments require an increasing levy?

        That isn’t true Matthew. Government policy changes extending entitlements have loaded hundreds of millions more costs onto ACC in the last couple of years. That is alarming in my view.

        Secondly there is much evidence that levies would need to go up to pay for existing entitlements. Government made a policy decision in 1998 to fully-fund the whole cost of ACC costs in the year they are incurred. This was adhered to by Labour. There was a 16 year timeframe for moving to a fully-funded system.

        Why is this important? Because if you don’t fund the costs of treatment at the time they are incurred, you are passing that cost onto future generations of levy-payers. It achieves the very opposite of what the Super Fund is designed to do for superannuation. Nick Smith’s data on levy projections were the levy rates needed to be charged to meet the fully-funded commitment so that ACC levy-payers pay the actual costs of their injuries.

        • Ari

          Give us a figure for the shortfall. If you want to be really clever, give us two figures, one that discounts any one-off costs this year, and we’ll see whether you actually have anything to be “alarmed” over.

          Saying the costs are going up by hundreds of millions doesn’t matter if it’s already well-funded for the long-term trend.

          • Tim Ellis

            It isn’t “well-funded for the long-term trend”. ACC has never been fully-funded. Until 1998 it was a “pay-as-you-go” basis. All that does is pass the cost of injuries onto future generations. It is the very opposite of what the Super Fund has tried to achieve.

    • Adam 8.3

      Um, ACC has been privatised before by National when it was last in government – just months before the last Labour government come to power.

      Seems they’re just picking up where they left off.

  9. Bill 10

    Unfortunately we have TVNZ news reporting the ACC situation as one where $1.5 b (or whatever) was invested last year and lost and the same for the year before.

    In other words instead of news, we are being told that Ross Wilson and the board took $1.5 b of our money last year and lost it.

    It’s not even misinformation because it is way beyond any semblance or definition of information in the first place.

    Wish I could find the link to it. (TVNZ 6 O’Clock news this week sometime if you feel able to hunt their site.)

    Anyway, the point is that the majority of people are forming their perceptions from TV news or from others passing on their perceptions based on TV news on the rare occasions that politics enter into conversation…tit-bits here and snippets there. (As an aside. How can politics be discussed if there is no info to base the discussion on? If all there is is a vague amorphous ‘feeling’ around, what arguably should be, pertinent issues?)

    And a consistent shaping perception is all that’s needed in a world where information is old hat : where manipulating perceptions at an emotional level has replaced attempts to relay information.

    Pravda and TASS come strongly to mind, although they didn’t have their techniques any where near as well refined as this lot of corporate propagandists we are dealing with.

    With Pravda and TASS, a person could read between the lines, but in the media that the majority of us are exposed to and pay any attention to, there are no lines any more….nothing to read between.

    Insofar as corporate media go hand in glove with right wing policy…I’ve forgotten my example, so I’ll throw this out instead. No big fan of Obama, but ever wondered why he only got 52.9% of the vote? How McCain came so close in what should have been a ‘no contest;?

    Or, closer to home, why is Labour gone from government here? I’d argue it’s simply because we were told, through the manipulation of perceptions, we had had enough. No other reason.

    And ACC will go. And private prisons will be built. And the list will grow and grow and the majority will acquiesce because melded perception rather than informed opinion is the order of the day.

    I know this has all been expressed before on the Standard. It’s worth the repeating though given that this whole ACC malarkey.

    • higherstandard 10.1

      “Or, closer to home, why is Labour gone from government here? I’d argue it’s simply because we were told, through the manipulation of perceptions, we had had enough. No other reason.”

      The only study of MSM I’ve seen of reporting leading up to the election suggests that Labour and HC received more positive reporting from the MSM than National and JK there for I’m dubious of your claim.

      • @ work 10.1.1

        That study only covered 6 weeks.

        • higherstandard

          Do you have data that shows something different ?

          • @work

            No, I’m just saying you’ve left out the fact that it covered 6 weeks, which is quite relevant. Do you have anything that shows that it is apropriate to extrapolate the last 6 weeks of coverage out to the entire election campaign?

          • higherstandard

            I think it’s appropriate to note the results of this study as being supportive of a position that the MSM did not manipulate the NZ public to bring about a change in government – unless you take the view that they were overwhelmingly positive and manipulative prior to those six weeks and then did an about face just to confound everyone.

            If people keep blaming the MSM for what was far and away the largest MMP majority ever achieved, and a high result even in FPP terms there’ll be no lessons learned by the opposition parties.

  10. toad 11

    Tim Ellis said: How do you mean “privatising profit’, when the Employers’ Account doesn’t currently deliver a profit?

    Because what is being proposed is not full privatisation of the Employers’ Account Tim, but privatisation by stealth of the profitable part of it. Private insurers will compete with ACC for workplace accident insurance business. They will grab the profitable businesses where risk can easily be minimised, leaving ACC to cover the ones where it can’t.

    Result: Levies will reduce for those with private accident insuramce but will have to increase for those left with ACC that the private insurers don’t want. Then more grand pronouncements from politicians on the right about how well the private sector has done compared to the public.

    • Pascal's bookie 11.1


      Tim’s had this pointed out before but he just keeps going on about gold plates and what not.

      I think his agitpropticopter is stuck.

    • Tim Ellis 11.2

      Toad, I think you have misunderstood the concept of actuarial risk. Group actuarial risk is applied both at ACC and in insurance companies to determine premia. There is a high degree of cross-subsidy within individual actuarial-based risk categories (in fact it is all about cross subsidies, as all claims are cross-subsidised by premia within the risk category), but there is almost nil cross-subsidy across risk categories. That’s how actuarials function, and ACC’s actuarials are no different from any other insurance company.

      To give a specific example, Forestry Company A with the same risk profile as Forestry Company B ends up cross-subsidising Forestry Company B, when there is a claim for an accident in the workplace. ACC charges forestry employer levies at a substantially higher rate than it charges banks. How much more do forestry employers pay? Pretty much the entire risk in the actuarial category.

      It simply is a nonsense that there are “easy pickings” in the ACC Employers’ account that are ripe for extracting profit, or are more profitable for competition, leaving the prospect of the state carrying the can for non-profitable risk categories in the Employers’ account. Furthermore, at present large employers effectively contract out of ACC and substantially carry their own risk and self-insure through the accredited employers’ scheme.

      The operation of the Employers’ account is the least contentious part of ACC. With some glaring exceptions, It is mainly around the entitlements and operations of the Earners’ and non-Earners’ accounts, which constitute the major bulk of ACC claims and costs, which has gone far removed from a no-fault 24-hour scheme where the government needs to direct its attention in my view.

  11. bill brown 12

    It can be flown and get stuck what is it?

  12. Gareth 13

    For an online article outlining the same thing: Brian Follow in the Herald.
    “For the Government to wrap legitimate concerns about slippage in ACC’s performance in a whole lot of shrill scaremongering and scapegoating is gratuitous.”


  13. keith 14

    Who’s seen the six o’clock news about Nick Smith barging uninvited into a meeting the ACC board were having? After his gate crashing he then tried to answer questions directed to the CEO which brought an end to the meeting. What a wanker.

  14. killinginthenameof 15

    I think talking down then cutting physio has been in the pipe line for quite a while, A few months ago I had the displeasure of spending time with a young idealistic tool who works for the business round table and is a walking pr line dispenser, He spent the whole time getting into discussions with people about ACC, then bringing it around to talking about how crap and useless physio is.

    Another thing I noticed over at kiwiblog is some of them were trying to pin it all on cyclists (I assume just to be anti environmental, anti green) but anyone who’s visited a hospital emergency department on a weekend, knows that they are absolutely over flowing with rugby players. John Key would be very very unwise to mess with rugby.

  15. John Dalley 16

    “If Nick Smith was Honest” ha ha ha ha & ha.
    Nick Smith is being so dishonest that it actually show up instantly he opens his mouth.
    I said it on another post but i think John Key is already losing control of the more radical older members of his cabinet. This is what i thought would probably happen with his inexperience as a politician starting to catch up. Can’t wait to see the next polls, bet Nationals lead drops dramatically.

  16. r0b 17

    Can’t wait to see the next polls, bet Nationals lead drops dramatically.

    Don’t pin your hopes on it, I think it’s more likely that National will cruise high in the polls for quite some time. They get a honeymoon, the media are in no shape to do the job of holding them to account as they should (the “reporting” of this ACC situation is a case in point), so the honeymoon will chug along with considerable inertia.

    Sadly, it won’t be until too many people’s live have got inexorably worse and worse that they will wake up and realise (without the media’s help) just exactly what this Nat government is made of. Then you’ll see a shift in the polls.

    Why do we always have to learn the hard way?

    • Draco T Bastard 17.1

      It’s difficult to learn the easy way when the information you’re receiving has been doctored to ensure you get the wrong idea.

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