Strings said: “Much of the ‘blowout’ of the liability in the nonearners account is due to accounting practices and paper losses – as actuary Jonathan Erikson said yesterday”

Is there anyone out there who understands accounting?

Now, that’s a bit naughty Strings. What Sue Bradford actually said was “Much of the ‘blowout’ is due to accounting practices and paper losses – as actuary Jonathan Erikson said yesterday.”

Her reference to liability in the non-earners account as being at the nub of National’s attack was in the previous paragraph and it is claer she is not relating the two. It is actually Nick Smith, not Sue, who is deliberately trying to confuse the public by linking these two separate issues.

The increased liability in the non-earners account, as you say, has nothing to do with the loss of value of ACC’s investments. And in the context of the overall difference between ACC assets and liabilities, the shortfall in the non-earners account is miniscule – the vast bulk of the overall deterioration in financial position has been caused by changes in accounting practices and losses on investments – not by losses on any of ACC’s operational accounts.

What’s more, the liability of unfunded claims stretch out for some 40 years before they all require to be funded. Extending the date by which ACC’s liabilities are required to be to be fully funded, together with some relatively small increases in levies and an (admittedly not so small) increase in the appropriation to fund the non-earners account would see ACC right without the slash and burn approach National seems intent on.

Either Nick Smith himself doesn’t undertand the difference between financial position and financial performance, assets an liabilities, and income and expenditure (which I suspect is unlikely) or he is relying on the fact that much of the public don’t in order to create confusion and manufacture a crisis.

Oh, and Stings, you also make reference to “insolvency”. For those who think privatised accident insurance is a good idea, you might like to take a look at the collapse of HIH Insurance, who in 1999-2000 held a significant share of NZ’s privatised workplace accident insurance market. Fortunately, workplace accident insurance had been brought back into the public domain before that happened.

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“Much of the ‘blowout’ of the liability in the nonearners account is due to accounting practices and paper losses – as actuary Jonathan Erikson said yesterday”

Is there anyone out there who understands accounting? The paper losses on ACC’s investments are, indeed only accounting entries, required by the adoption in New Zealand of International Accounting Standards. However, these have nothing to do with the “blowout of the liability in the nonearners account” because these are losses in the ASSETS of the corporation, not increases in its liabilities. The liabilities in this account are the amounts it is believed, by the corporation’s actuaries, are required to pay out entitlements for claims already approved under the legislation. This includes, for example, weekly payments to people rendered unable to work through stress acquired at the workplace, historic sexual abuse (only remembered after a free counselling session with a counsellor who – after certifying the ‘injury’ – typically priveds some 200 further counselling sessions now paid for by ACC.

PLease establish clearly, for the sake of good debate, the diference between an asset and a loability, and also accept that the concept of insurance and insolvency both require that an insurer have enough assets at any point in time to cover its known liabilities at the same point in time.

Happy daze

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bikemike said: Toad’s comment hit the nail on the head at 9:27.

Actually, bikemike, my 9:27 comment outlines only one of the problems (that the playing field isn’t level so ACC cannot effectively compete).

Another, and possibly more serious, problem is the potential for corruption. Under the private competitive model it is the employer who has the choice of insurer. The injured employee does not – the funder of their treatment and rehabilitation is an insurer chosen not by them but by their employer.

This provides a perverse incentive for employers and insurers to collude to deny that there was a personal injury or to deny that it was work-related. By doing this, employers get the benefit of lower premiums, while insurers get the benefit of lower payouts. Throw in the “company doctor” who is on the employer’s payroll to do assessments of workplace injury claims and therefore has a vested interest in providing assessments favourable to the employer, and you can see the huge potential for corruption. I was working as an ACC claimant advocate at the time of the short-lived 1999-2000 private competitive model being in place, and I saw first hand this type of corruption starting to emerge.

The person who loses out is the injured employee who, not having private insurance of their own because they assumed they would be covered by ACC, has to pay for their own treatment and rehabilitation, or doesn’t get any because they can’t afford to pay.

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Toad’s comment hit the nail on the head at 9:27.

My 2c… In my experience, the problem is that it is sometimes hard to get treatment and pay for it.

There are times when I have not had an ‘accident’ and have been prompted repeatedly to establish that it was an accident, and put it on ACC. It seems that there must be advantages to the provider over and above getting me on a course of subsidised treatments that makes them so zealous to persuade me even when I offer to pay off my own labour.

Those times it was an accident, and I have claimed, the cover has been most welcome and the support excellent. It is a national asset.

The abuse however is no different from that in direct insurance really. Just yesterday my mechanic suggested I lob a cricket ball through my windscreen so as to claim on my insurance for a new one.

I think ACC need to try harder to stop that kind of buse, and those that go on about extreme sports need to to be disavowed of the idea that that per se is abuse of the system – I am happy that as a country we support people who fail, or who are in need, regardless of their varied (non-criminal) adventures.

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“Quite the reverse. It was working well. Lower premiums and better service through competition and greater efficiency.”
Employees found it quite difficult to get their claims. Insurance companies tried to resist covering medical costs as much as possible. It also created an environment where employees were actively encouraged to not make claims in order to keep said premiums down.
“No more so than get shafted now.”
Agreed on this point. with recent moves by the National led government to cut back on employees ACC rights, it is starting to look quite bad. Although I must admit I am surprised to see you make such a point.
“In any case, if you want to stay with ACC once it is opened up to competition, that’s your call.
I will be going elsewhere.”
The problems I mentioned would be enhanced by ACC. Once again I remind you that the pricewaterhouse cooper review was against opening it up to competition.

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Toad,
An insurance company will likley take any company given sufficent fees, ACC mearly has to do the same.
Anyway, what are these industries that have such high risk that insurance companies would not insure them? Must have absolutly massive profits and pay rates to justify such risk!

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No Sapient, ACC would perform more poorly because it would be lumbered with the employers that the private insurers don’t want. When employers are permitted to pick their insurer, but one insurer is forced to insure the employers the others don’t want, that insurer (ACC) is at a disadvantage competitively. It is not the level playing field those on the right talk of so often.

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BP,
A large portion of the fees that one must pay to play sports, even at school-level, goes to ACC for just that eventuality.

Toad,
The whole point is that opening it up to competition will result in ACC differentiating its fee struture so that higher risk work places are charged higher fees and lower risk are charged lower. The only reason that ACC would perform more poorly is if they had more dependants or massive beurocracy. If ACC does have more dependants due to a higher rate of pay outs then their fees will reflect this and with competition an indidivual will have a choice as to iff they want the lower fees and tighter payout conditions of a private insurance company or the higher fees and more loose payout of ACC.
Alternativly, we could impliment a court system like I mentioned before based on a contental style court, without even the need for lawyers, to insure payouts are made when they should be made. Make employeers directly responsible for all the costs incurred in treating an individual harms whilst working on their premises and they will have a motive to choose the option that best covers their own hides.

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# BluePeter Says:
March 16th, 2009 at 11:54 am

>> make it easier to avoid these costs being charged to employers?

> Charge it to sports clubs.

that’s already what’s supposed to happen. Why would it be any harder with a single insurer than with multiple insurers?

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In other news…..

Car battery problem no longer a problem:

http://www.economist.com/science/displaystory.cfm?story_id=13277371

>>make it easier to avoid these costs being charged to employers?

Charge it to sports clubs.

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BluePeter Says:
March 16th, 2009 at 9:55 am

> Why should low-risk businesses be subsidising high risk, irresponsible businesses? Why should I be subsidising eXTreMe “sport” masochists and weekend rugby heads who make a point of “goin’ in hard”?

Of course businesses should not be subsidising the treatment of sports injuries. But, how would having a range of providers make it easier to avoid these costs being charged to employers? How does having one insurer make it harder to deal with this problem?

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lol i just want notifications of what else transpires in this thread, didn’t have anything to say.

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stepen’s good today..

..isn’t he..?

phil(whoar.co.nz)

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.

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“catherine delahunty was on tv3 breakfast telly.”

So nobody watched it then?

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oh..!..catherine delahunty was on tv3 breakfast telly..

..(fwiw..she did ok..)

..phil(whoar.co.nz)

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who is the third person standing for co-leadership..?

phil(whoar.co.nz)

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Just like home/motor insurance.

Competition will encourage those in risky areas to clean up their act, or pay higher premiums.

Why should low-risk businesses be subsidising high risk, irresponsible businesses? Why should I be subsidising eXTreMe “sport” masochists and weekend rugby heads who make a point of “goin’ in hard”? They’re wearing physio as a badge of honor, but expect everyone else to foot the bill.

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BluePeter said: Then they’ll be able to compete, so what’s your problem?

The problem, BP, is that every employer will be required to have a workplace injury insurer. The private insurers will cream off the ones where it is easiest to reduce accident risk by attracting them with lower levies. ACC will be left with the ones that none of the private insurers want. So ACC’s levies will go up, while the private insurers’ levies go down. So ACC won’t actually be able to compete at all, because they will be required to be the insurer of last resort.

So ACC will be portrayed as under-performing and inefficient and then we’ll see the Animal Farm response from right-wing politicians – private good, public bad – and the call to privatise the lot.

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>>while ACC has its failings, they require some tinkering around the edges

Then they’ll be able to compete, so what’s your problem?

You will be free to insure with ACC, or another company.

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