Fraud, Corruption, and Conspiracies
It is an old adage that when one is uncovering and exposing a rort one needs to follow the money. Where is the payoff going? Who is benefiting? In New Zealand we have had an example recently where traditional opponents conspired together to cream off some money from the tax payers to feather their own nests.
The cause d'jour was workplace health and safety. The conspirators were traditional opponents--the Council of Trade Unions ("CTU") and Business NZ. Together they persuaded the government owned Accident Compensation Corporation to pay out $20m over ten years to the respective organisations/pressure groups to "train" employees in health and safety practices. This from the NZ Herald:
Showing posts with label ACC. Show all posts
Showing posts with label ACC. Show all posts
Friday, 17 January 2014
Wednesday, 20 June 2012
In Denial
Distorted Visions
New Zealand's accident insurance system is a disaster in the way all socialised (state run, state legislated, state funded, monopolistic) systems inevitably turn out. They inevitably become weighed down with entitlement fiefdoms, self-serving ambition on the part of politicians, board and management, and blighted with gross inefficiencies. None of these cancers is easily recognised nor "excisioned" when the prevailing zeitgeist is "the state does it better".
But when New Zealand adopted a fully state funded accident insurance scheme we were promised that it would be the best in the world, and would be regarded with envy by all enlightened and developed countries. It was all part of building the socialist nirvana down under, fast following Sweden and Denmark. How quaint.
New Zealand's accident insurance system is a disaster in the way all socialised (state run, state legislated, state funded, monopolistic) systems inevitably turn out. They inevitably become weighed down with entitlement fiefdoms, self-serving ambition on the part of politicians, board and management, and blighted with gross inefficiencies. None of these cancers is easily recognised nor "excisioned" when the prevailing zeitgeist is "the state does it better".
But when New Zealand adopted a fully state funded accident insurance scheme we were promised that it would be the best in the world, and would be regarded with envy by all enlightened and developed countries. It was all part of building the socialist nirvana down under, fast following Sweden and Denmark. How quaint.
Tuesday, 1 May 2012
Something Rotten in Denmark
The Boon of a Disinterested Free Press
A free, active, disinterested press has sometimes been called the Fourth Estate of government. When it does its job properly the benefits of its constraint upon abuse of power are significant. The corollary is also true: when the press abuses its position and tolerates conflicts between its own, commercial interests and the impartial truth it can do great damage to the body politic. Regrettably, we have seen far too much of the latter: a self-interested Press sensationalising stories to generate headlines, gain attention, and increase subscriptions. When this happens, truth is the first casualty. Civic freedom is the next.
Here is a prima facie example of the salutary power of the Fourth Estate--a free press--properly used.
A free, active, disinterested press has sometimes been called the Fourth Estate of government. When it does its job properly the benefits of its constraint upon abuse of power are significant. The corollary is also true: when the press abuses its position and tolerates conflicts between its own, commercial interests and the impartial truth it can do great damage to the body politic. Regrettably, we have seen far too much of the latter: a self-interested Press sensationalising stories to generate headlines, gain attention, and increase subscriptions. When this happens, truth is the first casualty. Civic freedom is the next.
Here is a prima facie example of the salutary power of the Fourth Estate--a free press--properly used.
Saturday, 12 February 2011
MacDoctor Counterpunch
Cockroaches Scuttling for Cover
We read MacDoctor's blog regularly. Today he counter-punches the ACC for its deceptive and misleading commentary to a parliamentary select committee. ACC, of course, is the government's monopoly insurance provider for victims of accidents. We remind everyone, particularly overseas readers, that New Zealand's Accident Compensation Corporation it a statutory insurance monopoly that exacts taxes from every New Zealander, primarily through the employer, to fund a no-fault accident compensation scheme. Since it has no competition to keep it honest, ACC is an incompetent, bureaucratic morass.
Now, to be fair, some of this decrepitude is not of ACC's making. The previous left-wing Labour government sought to transform the ACC into a social welfare arm of the state, greatly expanding the range of "coverage" or conditions under which someone could claim ACC payment for medical treatment. This was in response to rising public health care costs. To try to cut costs in vote Health, the "robbing Peter to pay Paul" Labour government decided to shift some liabilities to ACC, which has a capital investment fund, built up over years, to fund long-tail insurance claims. Never trust a socialist when other people's money is lying around. (We do hope our readers in the US are paying attention to this. This is where a public, taxpayer funded health system inevitably leads. Oh, sorry. We recall that the US federal government has already raided and expropriated--err, "borrowed"--Medicare and Medicaid funds for ongoing operational government expenditures. Too late.)
In any event, like all socialist schemes, eventually other people's money runs out. Suddenly, under the economic downturn and recession (in New Zealand we have had a double dipper) the (new, less socialist) government has run out of money and had to start borrowing. Suddenly cutting costs became flavour of the month in government circles--including at the ACC.
As part of the drive to cut costs, ACC started refusing legitimate (lawful) claims. It discovered a new reason for refusal: "degeneration", otherwise known as aging. If not aging, it is a condition where, as a result of an injury, secondary complications emerge. Imagine an accident that smashes a hip. The accident results in a pronounced limp which does further (maybe spinal) damage to the patient. ACC has started to argue that the further damage is a result of degeneration, and not from the original accident. Result: no funding. Bad luck buddy. Enjoy your life of pain. Now, remember that this is health insurance which the patient has involuntarily paid for through the taxation system. Suddenly the state insurance company is acting like a nasty private insurance company. But in this case it is made worse because there is no competition allowed for ACC to help keep it honest.
Well the ACC hierarchy were before its supervising parliamentary committee yesterday and were asked to explain why their rates of refusal due to "degeneration" had risen. Their lame explanation: medical specialists had increased their rates of referral to ACC for funding. Those nasty doctors were making claims they knew would never be approved. Thus speaketh the bureaucrat--who congenitally does not know the meaning of "the buck stops here". Like cockroaches scuttling for cover, they were.
MacDoctor slams this egregious canard for all that its worth, which, to be sure, is substantially less than a brass razoo.
We read MacDoctor's blog regularly. Today he counter-punches the ACC for its deceptive and misleading commentary to a parliamentary select committee. ACC, of course, is the government's monopoly insurance provider for victims of accidents. We remind everyone, particularly overseas readers, that New Zealand's Accident Compensation Corporation it a statutory insurance monopoly that exacts taxes from every New Zealander, primarily through the employer, to fund a no-fault accident compensation scheme. Since it has no competition to keep it honest, ACC is an incompetent, bureaucratic morass.
Now, to be fair, some of this decrepitude is not of ACC's making. The previous left-wing Labour government sought to transform the ACC into a social welfare arm of the state, greatly expanding the range of "coverage" or conditions under which someone could claim ACC payment for medical treatment. This was in response to rising public health care costs. To try to cut costs in vote Health, the "robbing Peter to pay Paul" Labour government decided to shift some liabilities to ACC, which has a capital investment fund, built up over years, to fund long-tail insurance claims. Never trust a socialist when other people's money is lying around. (We do hope our readers in the US are paying attention to this. This is where a public, taxpayer funded health system inevitably leads. Oh, sorry. We recall that the US federal government has already raided and expropriated--err, "borrowed"--Medicare and Medicaid funds for ongoing operational government expenditures. Too late.)
In any event, like all socialist schemes, eventually other people's money runs out. Suddenly, under the economic downturn and recession (in New Zealand we have had a double dipper) the (new, less socialist) government has run out of money and had to start borrowing. Suddenly cutting costs became flavour of the month in government circles--including at the ACC.
As part of the drive to cut costs, ACC started refusing legitimate (lawful) claims. It discovered a new reason for refusal: "degeneration", otherwise known as aging. If not aging, it is a condition where, as a result of an injury, secondary complications emerge. Imagine an accident that smashes a hip. The accident results in a pronounced limp which does further (maybe spinal) damage to the patient. ACC has started to argue that the further damage is a result of degeneration, and not from the original accident. Result: no funding. Bad luck buddy. Enjoy your life of pain. Now, remember that this is health insurance which the patient has involuntarily paid for through the taxation system. Suddenly the state insurance company is acting like a nasty private insurance company. But in this case it is made worse because there is no competition allowed for ACC to help keep it honest.
Well the ACC hierarchy were before its supervising parliamentary committee yesterday and were asked to explain why their rates of refusal due to "degeneration" had risen. Their lame explanation: medical specialists had increased their rates of referral to ACC for funding. Those nasty doctors were making claims they knew would never be approved. Thus speaketh the bureaucrat--who congenitally does not know the meaning of "the buck stops here". Like cockroaches scuttling for cover, they were.
MacDoctor slams this egregious canard for all that its worth, which, to be sure, is substantially less than a brass razoo.
Monday, 27 December 2010
Informal Fallacies
Bulverism
Bulverism is a logical fallacy in which, rather than proving that an argument is wrong, a person instead assumes it is wrong, and then goes on to explain why the other person held that argument. It is essentially a circumstantial ad hominem argument. The term "Bulverism" was coined by C. S. Lewis.
Lewis explained bulverism as follows:
Here is a classic example of the fallacy in full-throated roar, courtesy of Dr Nick Smith, Minister of ACC. Smith has been challenged by surgeons who claim that the ACC, for which he is responsible, has been deliberately turning down surgery for accident victims on the grounds that their affliction is a result of old age, not an accident.
Here is Dr Smith's bulveristic response:
Bulverism is a logical fallacy in which, rather than proving that an argument is wrong, a person instead assumes it is wrong, and then goes on to explain why the other person held that argument. It is essentially a circumstantial ad hominem argument. The term "Bulverism" was coined by C. S. Lewis.
Lewis explained bulverism as follows:
You must show that a man is wrong before you start explaining why he is wrong. The modern method is to assume without discussion that he is wrong and then distract his attention from this (the only real issue) by busily explaining how he became so silly. In the course of the last fifteen years I have found this vice so common that I have had to invent a name for it. I call it "Bulverism". Some day I am going to write the biography of its imaginary inventor, Ezekiel Bulver, whose destiny was determined at the age of five when he heard his mother say to his father — who had been maintaining that two sides of a triangle were together greater than a third — "Oh you say that because you are a man." "At that moment", E. Bulver assures us, "there flashed across my opening mind the great truth that refutation is no necessary part of argument. Assume that your opponent is wrong, and the world will be at your feet. Attempt to prove that he is wrong or (worse still) try to find out whether he is wrong or right, and the national dynamism of our age will thrust you to the wall." That is how Bulver became one of the makers of the Twentieth Century.Bulverism usually turns on a deliberate casting of suspicions upon the motives of your opponent, alleging that he stands to benefit in some way personally from the position or case he is making. "Therefore", the argument he is making must be faulty, because the one making it is self-interested.
Here is a classic example of the fallacy in full-throated roar, courtesy of Dr Nick Smith, Minister of ACC. Smith has been challenged by surgeons who claim that the ACC, for which he is responsible, has been deliberately turning down surgery for accident victims on the grounds that their affliction is a result of old age, not an accident.
Here is Dr Smith's bulveristic response:
Dr Smith warned levies would rise if ACC treated more cases, and said people should not be naive about the financial interests of orthopaedic surgeons pushing for more work to be paid for by ACC. He said 10 orthopaedic surgeons were paid more than $2.4 million each by ACC last year, including one who got $3.6 million. Figures included hospital costs, but he estimated the surgeons would have received half of that money. (NZ Herald)Ad hominem "arguments", of which bulverism is one, are often employed by those who are defensive, or too intellectually lazy to refute an argument and so play the man rather than the ball, or those feeling the heat and wanting to deflect attention elsewhere. In all cases, ad hominem is a fallacy because it amounts to a gratuitous slur, not an argument.
Wednesday, 22 December 2010
ACC Abuses Degenerate
Common Sense Court Verdict
We posted here on the disturbing trend by the Accident Compensation Corporation, a state-run monopoly, to refuse compensation to accident victims on the grounds that their injuries were a result of "degeneration", which is to say, old age.
A recent court case appears to make that rort itself subject to degenerative decay. Which is good news. As reported in the NZ Herald, we read:
We posted here on the disturbing trend by the Accident Compensation Corporation, a state-run monopoly, to refuse compensation to accident victims on the grounds that their injuries were a result of "degeneration", which is to say, old age.
A recent court case appears to make that rort itself subject to degenerative decay. Which is good news. As reported in the NZ Herald, we read:
ACC has been ordered to pay for the neck surgery of an injured claimant, even though he was "predisposed" to spinal problems because of degeneration. The Accident Compensation Corporation can use age-related degeneration as a reason for disqualifying a claimant for surgery but only if a personal injury is caused "wholly or substantially" by ageing.Jolly good show. Now that this particular monopolistic rort has begun to degenerate, courtesy of the courts, let the housecleaning begin in earnest.
Alan Lyth, the principal of Bairds Mainfreight Primary School in Otara, fell 3m in June 2008 from a ladder that was leaning on his home after cleaning leaves off the roof. Aged 59 at the time, he suffered injuries to his right buttock, right shoulder and neck. His orthopaedic surgeon, Rodney Gordon, recommended a spinal operation, but ACC refused to pay after receiving a report from one of its medical advisers, orthopaedic surgeon Ray Fong, which concluded: "... this is a degenerative condition rendered symptomatic following an accident."
A reviewer agreed, but in appeal evidence given to District Court Judge Martin Beattie, Mr Gordon said the ladder accident was the "majority" cause of Mr Lyth's needing spinal surgery, although he acknowledged there were degenerative changes in his neck. . . . "On the balance of probabilities it is my opinion that the injury certainly caused more than 25 per cent of the problem for which surgery was required." . . . His degenerative condition merely made it more likely that accident trauma such as the fall would "tip the nerve system over the edge and bring about [nerve] entrapment".
John Miller, head of the firm which employs the lawyer who represented Mr Lyth, said the case was an important judgment because it highlighted ACC's liability when degeneration was present but not the whole or substantial cause of the personal injury.
"... ACC says, 'Degeneration, end of story'; we say, 'Not end of story."'
Friday, 10 December 2010
ACC Abuses
Housecleaning Required
We all understand the basic principle of insurance. Large numbers of people pay small amounts of money into a big pot. When damage occurs to some, the pot of money is accessed to compensate them or restore them. It is an excellent service. But the potential for conflicts of interest are very high. Paying out claims reduces profits. The owners or shareholders of an insurance company, therefore, have an interest in refusing claims. The more claims management refuses, the higher their profits.
Moreover, in any dispute the refused claimant is usually at a severe disadvantage. In most cases they do not have the financial resources (and as a result of the damage they have suffered which formed the occasion for the claim in the first place, they have usually even less resources) to take the insurance company to court, whilst the insurance company has plenty of resources to fund a legal defence, should they need one. Moreover, they have access to "experts" who are funded by the company: so they are likely to sing from the company's songsheet.
These problems are compounded exponentially when the insurance company is owned by the government, the insurance is compulsory, and the "service" is a statutory monopoly. When harder fiscal times hit and the government's books are in the red, as now, the owner (the government) has powerful incentives not to pay claims. The NZ Herald is running an expose upon the practices of the ACC--the state insurance monopoly for compensating people when they have suffered and accident. It has been alleged that if anyone is over 40, the Corporation routinely puts an injury down to "natural degeneration" and has a bevy of tame "experts" to back their decisions.
Firstly, make the ACC operate in a competitive environment by allowing other (private) insurance companies compete with the ACC. (The government has talked about doing this, but has failed to act. Presumably the minister responsible for ACC, Dr Nick Smith has been captured by the Corporation and is now enslaved to its interests.)
Secondly, regulate to ensure that all medical diagnoses in claims cases be made by independent experts approved by the respective professional associations. In addition, every company should be required to change the experts they use regularly, in a similar way to the requirement that companies change their auditors periodically.
Thirdly, ensure that courts are accessible to claimants and encourage out-of-court settlements by setting up an industry funded ombudsman with teeth to rule on complaints quickly.
Finally, require annual publication of the claims paid versus refused data, together with actions taken by the ombudsman broken down by company.
These simple measures would go a long way toward mitigating conflicts of interest in the accident compensation insurance industry and cleaning house at the ACC.
We all understand the basic principle of insurance. Large numbers of people pay small amounts of money into a big pot. When damage occurs to some, the pot of money is accessed to compensate them or restore them. It is an excellent service. But the potential for conflicts of interest are very high. Paying out claims reduces profits. The owners or shareholders of an insurance company, therefore, have an interest in refusing claims. The more claims management refuses, the higher their profits.
Moreover, in any dispute the refused claimant is usually at a severe disadvantage. In most cases they do not have the financial resources (and as a result of the damage they have suffered which formed the occasion for the claim in the first place, they have usually even less resources) to take the insurance company to court, whilst the insurance company has plenty of resources to fund a legal defence, should they need one. Moreover, they have access to "experts" who are funded by the company: so they are likely to sing from the company's songsheet.
These problems are compounded exponentially when the insurance company is owned by the government, the insurance is compulsory, and the "service" is a statutory monopoly. When harder fiscal times hit and the government's books are in the red, as now, the owner (the government) has powerful incentives not to pay claims. The NZ Herald is running an expose upon the practices of the ACC--the state insurance monopoly for compensating people when they have suffered and accident. It has been alleged that if anyone is over 40, the Corporation routinely puts an injury down to "natural degeneration" and has a bevy of tame "experts" to back their decisions.
Orthopaedic Association president Gary Hooper said the corporation was taking a similar hard line with many older accident victims. "ACC is trying to say everyone over 40 has degeneration," he said.
One of Auckland's six or seven specialist spinal surgeons, who asked to remain anonymous, said the corporation was using a handful of retired surgeons and some practising general surgeons as far afield as Timaru to declare that injuries were due to degenerative conditions on the basis of x-rays and scan results, without seeing the patients. "We are seeing people rejected for no good reason. I've had 40, 60, 100 cases in the last few years," he said. "This is coming to a head. There is a number of us who have to go into bat for our patients on a weekly if not daily basis."
He said the system was unfair because people who could not afford lawyers, and many immigrants who did not know the system, did not challenge ACC's decisions.This situation, if true, amounts to breach of contract and theft on the part of the ACC and the government. And it rings true, does it not? This is certainly a circumstance where neither the government nor the ACC can be trusted. The conflicts of interest are too great. The remedies, however, are simple, effective, and easy to hand.
Mr Miller (an accident specialist lawyer) said ACC deliberately rejected many people on the basis that only a few would appeal. "ACC are just acting like these rapacious overseas insurance companies, refusing them holus-bolus on the flimsy grounds of degeneration, because we all have degeneration, and hoping like some of these overseas insurance companies that people won't challenge them," he said.
Firstly, make the ACC operate in a competitive environment by allowing other (private) insurance companies compete with the ACC. (The government has talked about doing this, but has failed to act. Presumably the minister responsible for ACC, Dr Nick Smith has been captured by the Corporation and is now enslaved to its interests.)
Secondly, regulate to ensure that all medical diagnoses in claims cases be made by independent experts approved by the respective professional associations. In addition, every company should be required to change the experts they use regularly, in a similar way to the requirement that companies change their auditors periodically.
Thirdly, ensure that courts are accessible to claimants and encourage out-of-court settlements by setting up an industry funded ombudsman with teeth to rule on complaints quickly.
Finally, require annual publication of the claims paid versus refused data, together with actions taken by the ombudsman broken down by company.
These simple measures would go a long way toward mitigating conflicts of interest in the accident compensation insurance industry and cleaning house at the ACC.
Thursday, 8 July 2010
Healthy Scepticism
Beware of Long Term Insurance Contracts
Back in the day some sections or circles of the Christian church ran the argument that insurance was sinful. The reasoning was based on the premise that an insurance contract represented a lack of trust in God's providence and goodness. Purchasing insurance was an unbelieving act.
The argument, although well meant, reflected a fatalistic or deterministic world view that drew upon Islamic theology more than Christian truth. The Christian faith provides strong doctrinal foundations for the rectitude of insurance contracts.
Nevertheless, care and discernment must be used when considering whether to purchase insurance, and what types of contracts to purchase. Careful consideration must be given to the company providing the service, as well as the nature of the contracts themselves. Generally speaking, contracts which offer a one-off lump sum payment are more likely to be honoured than not. Thus, life insurance, lump-sum payments for disability, health insurance, and property insurance are reasonably robust as contracts. But contracts which call for income continuance--that is, purport to provide an annuity stream for a long period of time--should be viewed with a great deal of scepticism.
In the local blogosphere two cases have come up in recent weeks. The first is Whaleoil's ongoing stoush with Fidelity Life which has cost him and his family dearly. The second is Madeleine's war with ACC, which is causing hardship in the Flannagan family. Both involve longer term income payments that the insurance company was obligated to pay, due to illness or injury of the claimant. In both cases the insurance company has taken active steps to renege on their ongoing payment obligations. The modus operandi in both cases has been to use medical "experts" (employed or contracted to the insurance company) to assess the respective injury or illness and determine that the company did not need to keep paying out.
The injured or sick party is immediately placed in a very parlous and weak position. The insurance company has deep pockets with which to purchase "expert" opinion. On its own authority it can terminate or reduce payments. The claimant must take the initiative legally to get the payments reinstated. The process can be long and costly--and by definition usually the claimant is under financial pressure. All the advantage, then, lies with the insurance company.
Income continuance insurance usually has high premium costs and the delivery of the contracted obligation is acutely uncertain. When considering this kind of insurance be very, very sceptical and cynical.
Now, of course, in Madeleine's case it is ACC--an agency of government--which appears to be playing fast and loose. One has no choice about ACC "premiums": they are extracted involuntarily via the taxation system. But this simply serves to reinforce the point: if a compulsory state agency can so easily renege on its obligations through what appears to be very sharp practice, then one should be even more sceptical about self-interested private business corporations.
Back in the day some sections or circles of the Christian church ran the argument that insurance was sinful. The reasoning was based on the premise that an insurance contract represented a lack of trust in God's providence and goodness. Purchasing insurance was an unbelieving act.
The argument, although well meant, reflected a fatalistic or deterministic world view that drew upon Islamic theology more than Christian truth. The Christian faith provides strong doctrinal foundations for the rectitude of insurance contracts.
Nevertheless, care and discernment must be used when considering whether to purchase insurance, and what types of contracts to purchase. Careful consideration must be given to the company providing the service, as well as the nature of the contracts themselves. Generally speaking, contracts which offer a one-off lump sum payment are more likely to be honoured than not. Thus, life insurance, lump-sum payments for disability, health insurance, and property insurance are reasonably robust as contracts. But contracts which call for income continuance--that is, purport to provide an annuity stream for a long period of time--should be viewed with a great deal of scepticism.
In the local blogosphere two cases have come up in recent weeks. The first is Whaleoil's ongoing stoush with Fidelity Life which has cost him and his family dearly. The second is Madeleine's war with ACC, which is causing hardship in the Flannagan family. Both involve longer term income payments that the insurance company was obligated to pay, due to illness or injury of the claimant. In both cases the insurance company has taken active steps to renege on their ongoing payment obligations. The modus operandi in both cases has been to use medical "experts" (employed or contracted to the insurance company) to assess the respective injury or illness and determine that the company did not need to keep paying out.
The injured or sick party is immediately placed in a very parlous and weak position. The insurance company has deep pockets with which to purchase "expert" opinion. On its own authority it can terminate or reduce payments. The claimant must take the initiative legally to get the payments reinstated. The process can be long and costly--and by definition usually the claimant is under financial pressure. All the advantage, then, lies with the insurance company.
Income continuance insurance usually has high premium costs and the delivery of the contracted obligation is acutely uncertain. When considering this kind of insurance be very, very sceptical and cynical.
Now, of course, in Madeleine's case it is ACC--an agency of government--which appears to be playing fast and loose. One has no choice about ACC "premiums": they are extracted involuntarily via the taxation system. But this simply serves to reinforce the point: if a compulsory state agency can so easily renege on its obligations through what appears to be very sharp practice, then one should be even more sceptical about self-interested private business corporations.
Friday, 20 November 2009
The Virulent Cancer of Soft-Despotism
Bureaucrats To Do Home Inspections
A recent article in the Times of London tells us the next step the British government is taking to usher in a better world. We promise you that it will eventually be adopted in New Zealand as well. There is an ideological logic to these things that is relentless and will not be denied. We will not escape--at least as long as we continue to bow down to the State as our saviour and redeemer god.
Firstly, the UK.
Could you see something like this happening in New Zealand? If you don't, you must be either an incurable Pollyanna or blind, or both. It will inevitably come here. We have seen the beginnings already. Family visits by state bureaucrats are already being conducted in this country where children are considered to be living in "at risk" families. This programme was started by the National government in the late 1990's. National also gave us the Health and Safety legislation.
The Labour appointed Children's Commissioner, Cindy Kiro called for a nation wide database of all children and regular home visits to monitor progress and identity "at risk" children. It was not followed through for reasons of cost only. The Accident Compensation Corporation (ACC) tells us that one in three accidents in New Zealand occur in the home. The ACC also is under the kosh to contain costs--which includes any and all efforts to reduce accidents as much as possible.
Put all these together and it is inevitable that bureaucrats will eventually start visiting families on a regular basis, representing the interests of health, safety, and welfare. There is broad consensual support, laying aside the de rigueur posturing of parties when in opposition. It could be legislated for either by National or Labour: both major parties believe in an intrusive paternalistic soft-despotic state that is to order our lives, save us from harm, and redeem us from all ills in this world. The only restrictions they face are economic ones at the end of the day.
Until New Zealanders repent of their idolatrous worship of the state such extensions of state power and instrusive regimenting of our lives are inescapable. What now seems horrific when proposed in the UK will be viewed here as normal, natural, and entirely appropriate within ten years. It's only a matter of time and taxes. Nations that hate God end up being enslaved in one way or the other. We, in New Zealand, are well down that road.
A recent article in the Times of London tells us the next step the British government is taking to usher in a better world. We promise you that it will eventually be adopted in New Zealand as well. There is an ideological logic to these things that is relentless and will not be denied. We will not escape--at least as long as we continue to bow down to the State as our saviour and redeemer god.
Firstly, the UK.
Health and safety snoops to enter family homes
Robert Watts
Health and safety inspectors are to be given unprecedented access to family homes to ensure that parents are protecting their children from household accidents.
New guidance drawn up at the request of the Department of Health urges councils and other public sector bodies to “collect data” on properties where children are thought to be at “greatest risk of unintentional injury”.
Council staff will then be tasked with overseeing the installation of safety devices in homes, including smoke alarms, stair gates, hot water temperature restrictors, oven guards and window and door locks.
The draft guidance by a committee at the National Institute for Health and Clinical Excellence (Nice) has been criticised as intrusive and further evidence of the “creeping nanny state”. . . .
The guidance aims to “encourage all practitioners who visit families and carers with children and young people aged under 15 to provide home safety advice and, where necessary, conduct a home risk assessment”. It continues: “If possible, they should supply and install home safety equipment.”
Could you see something like this happening in New Zealand? If you don't, you must be either an incurable Pollyanna or blind, or both. It will inevitably come here. We have seen the beginnings already. Family visits by state bureaucrats are already being conducted in this country where children are considered to be living in "at risk" families. This programme was started by the National government in the late 1990's. National also gave us the Health and Safety legislation.
The Labour appointed Children's Commissioner, Cindy Kiro called for a nation wide database of all children and regular home visits to monitor progress and identity "at risk" children. It was not followed through for reasons of cost only. The Accident Compensation Corporation (ACC) tells us that one in three accidents in New Zealand occur in the home. The ACC also is under the kosh to contain costs--which includes any and all efforts to reduce accidents as much as possible.
Put all these together and it is inevitable that bureaucrats will eventually start visiting families on a regular basis, representing the interests of health, safety, and welfare. There is broad consensual support, laying aside the de rigueur posturing of parties when in opposition. It could be legislated for either by National or Labour: both major parties believe in an intrusive paternalistic soft-despotic state that is to order our lives, save us from harm, and redeem us from all ills in this world. The only restrictions they face are economic ones at the end of the day.
Until New Zealanders repent of their idolatrous worship of the state such extensions of state power and instrusive regimenting of our lives are inescapable. What now seems horrific when proposed in the UK will be viewed here as normal, natural, and entirely appropriate within ten years. It's only a matter of time and taxes. Nations that hate God end up being enslaved in one way or the other. We, in New Zealand, are well down that road.
Thursday, 29 October 2009
Labour and ACC
Is Labour Being Clever or Dumb?
Phil Goff, leader of the Labour Party, has adopted a Churchillian stance, sans cigar, pronouncing that Labour would die in the ditch to maintain the Accident Compensation Commission as a state monopoly. If the current government allowed private insurance companies to enter the market to provide insurance cover against accidents as an alternative to the present state monopoly an incoming Labour government would reverse it again--as they have done once already.
The question is begged as to why. There are plenty of areas where apparently it is apparently perfectly acceptable to Labour to have the State competing against private non-state entities for the provision of services. Health and medicine is one. Education is another. Vehicle testing is a third. Banking is a fourth. And, postal services. No dying in ditches there.
The Labour stance can be seen as being motivated by dumbness or by astute calculation. Which is it? The "dumb" version would paint Labour as casting around for anything which they hope would find resonance with the hearts of voters. Hence, the constant reference to removing the ACC monopoly as privatisation. Their political antennae, rightly or wrongly, tell them that the public is opposed to the State selling off assets: therefore, confuse competition with privatisation (the public won't discern the difference) and bingo, they will get "cut through" to the voters.
This is dumb, not just because if the public has to choose between massive state debt versus privatisation, they will likely prefer to see the family silver sold off, and fast. It's something that every wage and salary earner understands and faces constantly. They intuitively understand it on the wider, national scene. But it is also dumb because would also show Labour up to be political opportunists who would prostitute themselves without principle to anything that would have appeal. It puts them in the Winston Peter's category of politician.
So, it is possible that Labour is just dumb. But, then again, maybe not. Maybe they are being very astute. It is possible they understand that opening up the ACC to competition actually means the end of the ACC in the long run. It is possible they have discerned that competition represents a terminal disease for the ACC. Since they are socialists and believe in the superiority of a state commanded and controlled economy, they oppose opening up the ACC to competition in principle, regardless of political considerations.
If so, they would be right. Opening up the ACC to competition is a death knell for the ACC as a state entity--eventually. Why? Well, insurance relies on actuarial averages. Without the existence of such statistical averages, insurance becomes a ponzi scheme. Private competitors will commence by focusing on the "good risks"--as they should, because that is where the greater margins lie. It is where they will be able to price keenly. If there are "good" employers, with a very low accident record, with a very low risk employee activity, and private insurers can target them and get enough of them as client accounts, they will be able to charge them lower premiums than the current ACC levy.
Private competitors will be able to pick the jewels from the ACC's crown. Over time, the ACC will be left with the "bad risks" which means its claim costs and premiums will rise inexorably; the corporation will not be able to balance out the bad risks with the good risks. It will not be able to subsidise the bad with the good--which it currently can do, under a state monopoly.
Employers will, of course, find that the competitor private providers are more cost effective, efficient, responsive and productive than the ACC--and if they get caught with one which is not so, they can change to a competitor relatively easily, which will help keep every provider honest--as competition does. The obvious gains and benefits will lead to "scope creep" and more and more facets of ACC monopoly come under pressure and are opened to competition. In the end, like the old State Insurance company, it will be sold off. Whenever private, free market businesses are allowed to compete freely with government owned companies, the private free-market companies eventually drive the state companies out of business.
If this is the reasoning in Phil Goff's mind then the case is arguable. But one suspects that if so, he would not want to argue it. It's politically embarrassing to have to admit that ACC needs to exist as a state monopoly so that it can continue to get away with overcharging and gouging.
Is the Labour Party being dumb or clever? Hard to tell. But either way, it's stance on the ACC is bad for the country in the long run.
Phil Goff, leader of the Labour Party, has adopted a Churchillian stance, sans cigar, pronouncing that Labour would die in the ditch to maintain the Accident Compensation Commission as a state monopoly. If the current government allowed private insurance companies to enter the market to provide insurance cover against accidents as an alternative to the present state monopoly an incoming Labour government would reverse it again--as they have done once already.
The question is begged as to why. There are plenty of areas where apparently it is apparently perfectly acceptable to Labour to have the State competing against private non-state entities for the provision of services. Health and medicine is one. Education is another. Vehicle testing is a third. Banking is a fourth. And, postal services. No dying in ditches there.
The Labour stance can be seen as being motivated by dumbness or by astute calculation. Which is it? The "dumb" version would paint Labour as casting around for anything which they hope would find resonance with the hearts of voters. Hence, the constant reference to removing the ACC monopoly as privatisation. Their political antennae, rightly or wrongly, tell them that the public is opposed to the State selling off assets: therefore, confuse competition with privatisation (the public won't discern the difference) and bingo, they will get "cut through" to the voters.
This is dumb, not just because if the public has to choose between massive state debt versus privatisation, they will likely prefer to see the family silver sold off, and fast. It's something that every wage and salary earner understands and faces constantly. They intuitively understand it on the wider, national scene. But it is also dumb because would also show Labour up to be political opportunists who would prostitute themselves without principle to anything that would have appeal. It puts them in the Winston Peter's category of politician.
So, it is possible that Labour is just dumb. But, then again, maybe not. Maybe they are being very astute. It is possible they understand that opening up the ACC to competition actually means the end of the ACC in the long run. It is possible they have discerned that competition represents a terminal disease for the ACC. Since they are socialists and believe in the superiority of a state commanded and controlled economy, they oppose opening up the ACC to competition in principle, regardless of political considerations.
If so, they would be right. Opening up the ACC to competition is a death knell for the ACC as a state entity--eventually. Why? Well, insurance relies on actuarial averages. Without the existence of such statistical averages, insurance becomes a ponzi scheme. Private competitors will commence by focusing on the "good risks"--as they should, because that is where the greater margins lie. It is where they will be able to price keenly. If there are "good" employers, with a very low accident record, with a very low risk employee activity, and private insurers can target them and get enough of them as client accounts, they will be able to charge them lower premiums than the current ACC levy.
Private competitors will be able to pick the jewels from the ACC's crown. Over time, the ACC will be left with the "bad risks" which means its claim costs and premiums will rise inexorably; the corporation will not be able to balance out the bad risks with the good risks. It will not be able to subsidise the bad with the good--which it currently can do, under a state monopoly.
Employers will, of course, find that the competitor private providers are more cost effective, efficient, responsive and productive than the ACC--and if they get caught with one which is not so, they can change to a competitor relatively easily, which will help keep every provider honest--as competition does. The obvious gains and benefits will lead to "scope creep" and more and more facets of ACC monopoly come under pressure and are opened to competition. In the end, like the old State Insurance company, it will be sold off. Whenever private, free market businesses are allowed to compete freely with government owned companies, the private free-market companies eventually drive the state companies out of business.
If this is the reasoning in Phil Goff's mind then the case is arguable. But one suspects that if so, he would not want to argue it. It's politically embarrassing to have to admit that ACC needs to exist as a state monopoly so that it can continue to get away with overcharging and gouging.
Is the Labour Party being dumb or clever? Hard to tell. But either way, it's stance on the ACC is bad for the country in the long run.
Friday, 23 October 2009
Hazledine and Voodoo Economics
Dismal Science
Tim Hazledine is a Professor of Economics at Auckland University. It would, accordingly, be reasonable to expect that he had a grasp of the fundamentals of accounting. Alas. Apparently not.
In a recent article in the NZ Herald, Professor Hazledine sought to reassure us that the Accident Compensation Corporation is not broke, and that talk of it being so was foolish. The sub-text was that the government had a hidden agenda (which just happens to be a familiar Labour Party theme for the past twelve months). His reasoning rested on two arguments: firstly, a specious analogy.
He painted the picture of parents facing a future obligation to fund their children's education, but not having sufficient money at present in the bank. Of course, parents assume that their future earnings will enable them to meet future obligations. No-one, says the eminent professor, believes that the parents are broke simply because they do not have the money in their pockets right then to fund an education bill fifteen years away.
See! It's the same with the ACC. It will face big bills in the future, and it does not have enough money in the bank right now to pay the bill. But it is no more broke than the case of the impecunious parents.
It is hard to believe that such economic and accounting nonsense can come from a Professor! (not a first year, junior lecturer mind) of Economics! What has the world come to when academics in their field of supposed expertise can talk such nonsense.
OK, so let's quickly expose the false analogy. It would be very easy using sixth form economics or accounting knowledge to generate a discounted cash flow value of the parents' expected future earnings to calculate whether they would have enough to fund their children's education. And if the exercise showed that they had insufficient funds, and yet persisted in funding their children's tertiary education, they would indeed be bankrupted. This is exactly the same as the ACC. There is no difference. Discounted cash flows of future income and earnings, and discounted estimates of liabilities and expenses were used to work out whether the ACC will be insolvent. It's standard practice in finance; it would also be very useful to the impecunious parents as they plan their financial future. It's a necessary part of prudent financial management.
So far the analogy holds up. But it breaks down when we recall that parents are not legally obligated to fund their children's education, as ACC is legally required to compensate for accidents: it services an entitlement. Education costs can be reduced by students taking part-time jobs, gap years, winning scholarships, or simply not getting tertiary education. In other words, both parents and children have choices. Hazledine has compared apples with oranges and come up with purple kiwifruit.
The Professor's second argument puts ACC into a special category. It is a state-funded corporation--and therefore, by means of the expropriative power of the state--its future income is not restricted. Will it be short of funds in the future? Well, unlike the poor parents trying to fund their children's education, the Government can simply vote the ACC more money. It can "create" more income with the stroke of a legislative pen. Therefore, reasons Hazledine, it is sophistry to say that it is, or will ever become, bankrupt.
We can see that the Professor does not believe in accrual accounting when it comes to the government--contrary to most in his profession. This insistence on putting the Crown into separate economic and account categories as a special case is not only commercially naive, it is politically myopic. The Crown does not have an unlimited ability to produce money without cost. It has to be borrowed from someone, or rorted from the citizens, or it has to print it. Hasn't Hazledine heard of double-entry bookkeeping?
All of these alternatives are damaging and destructive in their own way; all carry significant costs. Hazledine must know this. It's just that he thinks it ought to be ignored. One wonders why? Maybe it's because he believes Keynes was right--let us eat, drink, and be merry today, for tomorrow we are all dead anyway.
But, if that's what Hazledine believes, he should say so. In any event, to suggest that the Government has endless, frictionless, and costless deep pockets is inane, deceptive, and misleading. Like we said, if that's an exemplar of what a Professor of Economics from Auckland University actually believes, things are far worse than we first feared.
HatTip: Macdoctor
Tim Hazledine is a Professor of Economics at Auckland University. It would, accordingly, be reasonable to expect that he had a grasp of the fundamentals of accounting. Alas. Apparently not.
In a recent article in the NZ Herald, Professor Hazledine sought to reassure us that the Accident Compensation Corporation is not broke, and that talk of it being so was foolish. The sub-text was that the government had a hidden agenda (which just happens to be a familiar Labour Party theme for the past twelve months). His reasoning rested on two arguments: firstly, a specious analogy.
He painted the picture of parents facing a future obligation to fund their children's education, but not having sufficient money at present in the bank. Of course, parents assume that their future earnings will enable them to meet future obligations. No-one, says the eminent professor, believes that the parents are broke simply because they do not have the money in their pockets right then to fund an education bill fifteen years away.
See! It's the same with the ACC. It will face big bills in the future, and it does not have enough money in the bank right now to pay the bill. But it is no more broke than the case of the impecunious parents.
It is hard to believe that such economic and accounting nonsense can come from a Professor! (not a first year, junior lecturer mind) of Economics! What has the world come to when academics in their field of supposed expertise can talk such nonsense.
OK, so let's quickly expose the false analogy. It would be very easy using sixth form economics or accounting knowledge to generate a discounted cash flow value of the parents' expected future earnings to calculate whether they would have enough to fund their children's education. And if the exercise showed that they had insufficient funds, and yet persisted in funding their children's tertiary education, they would indeed be bankrupted. This is exactly the same as the ACC. There is no difference. Discounted cash flows of future income and earnings, and discounted estimates of liabilities and expenses were used to work out whether the ACC will be insolvent. It's standard practice in finance; it would also be very useful to the impecunious parents as they plan their financial future. It's a necessary part of prudent financial management.
So far the analogy holds up. But it breaks down when we recall that parents are not legally obligated to fund their children's education, as ACC is legally required to compensate for accidents: it services an entitlement. Education costs can be reduced by students taking part-time jobs, gap years, winning scholarships, or simply not getting tertiary education. In other words, both parents and children have choices. Hazledine has compared apples with oranges and come up with purple kiwifruit.
The Professor's second argument puts ACC into a special category. It is a state-funded corporation--and therefore, by means of the expropriative power of the state--its future income is not restricted. Will it be short of funds in the future? Well, unlike the poor parents trying to fund their children's education, the Government can simply vote the ACC more money. It can "create" more income with the stroke of a legislative pen. Therefore, reasons Hazledine, it is sophistry to say that it is, or will ever become, bankrupt.
We can see that the Professor does not believe in accrual accounting when it comes to the government--contrary to most in his profession. This insistence on putting the Crown into separate economic and account categories as a special case is not only commercially naive, it is politically myopic. The Crown does not have an unlimited ability to produce money without cost. It has to be borrowed from someone, or rorted from the citizens, or it has to print it. Hasn't Hazledine heard of double-entry bookkeeping?
All of these alternatives are damaging and destructive in their own way; all carry significant costs. Hazledine must know this. It's just that he thinks it ought to be ignored. One wonders why? Maybe it's because he believes Keynes was right--let us eat, drink, and be merry today, for tomorrow we are all dead anyway.
But, if that's what Hazledine believes, he should say so. In any event, to suggest that the Government has endless, frictionless, and costless deep pockets is inane, deceptive, and misleading. Like we said, if that's an exemplar of what a Professor of Economics from Auckland University actually believes, things are far worse than we first feared.
HatTip: Macdoctor
Tuesday, 13 October 2009
Another Cancerous Catastrophe
Who Will Rid Us of This Super-Mummy?
We remember the fanfare with which ACC was launched in New Zealand. The name says it all. The Accident Compensation Corporation was, from the outset, a ponzi scheme where the State compensated people for having accidents. For several decades everyone patted all and sundry on the back, congratulating ourselves at how world-leading, world-beating, sophisticated, beaudy, and fantabulous the ACC scheme really was.
OK, so let's understand the fundamentals. Accidents happen in a fallen world. Legs get broken. Teeth get knocked out. Noses bleed. That sort of thing. Accidents happen at work, on the road, on the sports field, and while climbing trees. Sometimes accidents happen due to negligence on the part of the "accidentee", or some other person. But the whole point about accidents is that they are not intentional.
But the stupid statists who set the scheme up in the first place (to the rapturous applause of the populace, we might add) thought that wisdom argued for negligence to be removed from the equation, because there was a great evil lurking in the wings: the evil of legal torts, where people sued in civil proceedings for damages. Better to cut that evil off at the pass by establishing a universal entitlement to compensation by the state to anyone who suffered an accident, regardless of the cause, blame, liability, or whatever. It was this grandeur--the all encompassing nature of the scheme--which aroused the breathless ardour of the idealistic statists.
The government was going compensate people universally for anything (or most things) bad which happened to people. The subtle implication, of course, was that the gummint was somehow to blame when bad things happened. That unspoken implication of the state (that is, the nation, or more accurately "others") owing compensation when an accident happened because presumably "others" had not done a better job of protecting one was something to which the statists and soft-despots were happy to subscribe. Unbelievers cannot blame a deity; so they had to sheet blame to "society".
Everything seemed hunky dory. Yet within ten years it was clear to any who cared to look that the ACC was going to become a dead weight upon the country. It was going to crush down upon society. For, like all government entitlement programmes, it grew and grew. Also, it had deep within its bowels hidden costs--which are all too real, now.
Over time the number of accidents grew exponentially. The category of incidents or conditions counted as accidents increased apace (so, more accidents, and more things counted as accidents to be compensated by the scheme) meant that costs began to balloon out. But, like all dishonest peddlars, the sly politicians decided that they would not increase the levies, just yet. Let people get used to their entitlements so that they come to view them as their "right" then increase the levies. By then no-one will have the political will to undo the damage.
What naive Unbelievers always forget is that sinful man tends toward the easiest, most indulgent route, like water finding the downhill path. (In the make-believe, Alice-in-the-looking-glass world of the Unbeliever such things never happen, of course. The looking glass of Unbelief screens out such things, so that they cannot be seen.) Yet, the moral hazards created by a universal state funded compensation scheme for accidents are toxic in the extreme.
MacDoctor, at the cutting edge of reality in the cancerous catastrophe that is ACC, describes the impact of this moral hazard.
When society has become absurdly casual about accidents and at the same time paranoid about the most minor scrapes, we are led inevitably to observe that such contradictory behaviour is found in children. That is what ACC has done. Perniciously, it has transformed New Zealand into a nation of perpetual children: adults who have never grown up, who have little knowledge or care about real dangers, but who cry over the smallest of hurts.
Our gummint loves it. "Come to Mummy, darling," it croons. "We will take care of you." Meanwhile the dead weight of government swells by the year, squeezing the life blood out of its perpetually puerile subjects. And subjects they truly are. Free responsible men they are not. That is where Unbelief in the West inevitably leads.
We remember the fanfare with which ACC was launched in New Zealand. The name says it all. The Accident Compensation Corporation was, from the outset, a ponzi scheme where the State compensated people for having accidents. For several decades everyone patted all and sundry on the back, congratulating ourselves at how world-leading, world-beating, sophisticated, beaudy, and fantabulous the ACC scheme really was.
OK, so let's understand the fundamentals. Accidents happen in a fallen world. Legs get broken. Teeth get knocked out. Noses bleed. That sort of thing. Accidents happen at work, on the road, on the sports field, and while climbing trees. Sometimes accidents happen due to negligence on the part of the "accidentee", or some other person. But the whole point about accidents is that they are not intentional.
But the stupid statists who set the scheme up in the first place (to the rapturous applause of the populace, we might add) thought that wisdom argued for negligence to be removed from the equation, because there was a great evil lurking in the wings: the evil of legal torts, where people sued in civil proceedings for damages. Better to cut that evil off at the pass by establishing a universal entitlement to compensation by the state to anyone who suffered an accident, regardless of the cause, blame, liability, or whatever. It was this grandeur--the all encompassing nature of the scheme--which aroused the breathless ardour of the idealistic statists.
The government was going compensate people universally for anything (or most things) bad which happened to people. The subtle implication, of course, was that the gummint was somehow to blame when bad things happened. That unspoken implication of the state (that is, the nation, or more accurately "others") owing compensation when an accident happened because presumably "others" had not done a better job of protecting one was something to which the statists and soft-despots were happy to subscribe. Unbelievers cannot blame a deity; so they had to sheet blame to "society".
Everything seemed hunky dory. Yet within ten years it was clear to any who cared to look that the ACC was going to become a dead weight upon the country. It was going to crush down upon society. For, like all government entitlement programmes, it grew and grew. Also, it had deep within its bowels hidden costs--which are all too real, now.
Over time the number of accidents grew exponentially. The category of incidents or conditions counted as accidents increased apace (so, more accidents, and more things counted as accidents to be compensated by the scheme) meant that costs began to balloon out. But, like all dishonest peddlars, the sly politicians decided that they would not increase the levies, just yet. Let people get used to their entitlements so that they come to view them as their "right" then increase the levies. By then no-one will have the political will to undo the damage.
What naive Unbelievers always forget is that sinful man tends toward the easiest, most indulgent route, like water finding the downhill path. (In the make-believe, Alice-in-the-looking-glass world of the Unbeliever such things never happen, of course. The looking glass of Unbelief screens out such things, so that they cannot be seen.) Yet, the moral hazards created by a universal state funded compensation scheme for accidents are toxic in the extreme.
MacDoctor, at the cutting edge of reality in the cancerous catastrophe that is ACC, describes the impact of this moral hazard.
No matter what you say about the merits, or lack of merits, of ACC, one thing is abundantly clear to me. The devolvement of accident liability onto the taxpayer has made New Zealanders absurdly casual about accidents and, at the same time, completely paranoid about the most trivial of problems.
I see it in the long line of minor accidents that come through my door; minor cuts, grazes and bruises that our mothers would have cleaned and dressed themselves.
I see it in the ludicrous sight of yet another sports injury in a middle aged man with dozens of previous injuries from the same sport. He is safe in the knowledge that the taxpayer will support his reckless behavior.
I see it in the carelessness of the electrician changing the strip lights in our rooms, without turning off the electricity, or bothering to use a step ladder. ACC might be a welcome break – literally.
I see it in the workman with his protective goggles and ear-mufflers draped around his neck. His eyes and ears are “protected” by ACC.
I see it in the behavior of the previously injured, who do not change their behavior, or their work.
I see it in those who are recovering from injuries who re-injure themselves in the most stupid and most obvious fashions.
I see it in the simple statistic that New Zealand has nearly double the work-injury rate of Australia.
When society has become absurdly casual about accidents and at the same time paranoid about the most minor scrapes, we are led inevitably to observe that such contradictory behaviour is found in children. That is what ACC has done. Perniciously, it has transformed New Zealand into a nation of perpetual children: adults who have never grown up, who have little knowledge or care about real dangers, but who cry over the smallest of hurts.
Our gummint loves it. "Come to Mummy, darling," it croons. "We will take care of you." Meanwhile the dead weight of government swells by the year, squeezing the life blood out of its perpetually puerile subjects. And subjects they truly are. Free responsible men they are not. That is where Unbelief in the West inevitably leads.
Tuesday, 9 December 2008
The First Rotting Corpse
World Leader Now Insolvent
Several commentators have sought to focus attention upon the financial failure of the Accident Compensation Corporation (ACC). It is a disaster which raises a plethora of vitally important issues. Let us see if we can rehearse some of the most important.
Firstly, it is clear that socialist (state owned) commercial operations are not immune from commercial disaster or failure. In fact, they have a parlous history overall. Adolf Fiinkensein, at No Minister paints the ideological debate in sharp relief when he writes:
David Beatson weighs in, arguing that there is prima facie evidence of a cover-up on the part of the former government. Thus, along with the commercial reasons for collapse, we have the aspect of venal political “blind eye” syndrome, coupled with the apparent failure to obey the law. If true, there will be departmental collusion with the politicians who determined to “see no evil.”
There is no doubt that the recent financial market meltdown will have contributed significantly to the insolvency of the Corporation. The ACC, like all insurance companies, operated wholesale investment accounts in which “pre-paid” premiums are invested as reserves to fund forthcoming claims. With share markets declining well over fifty percent, the size of the reserve funds will have shrunken terribly. Is it appropriate to blame management and the Board for the market collapse?
Hardly. Management can only be blamed for imprudent investment strategies. Most insurance companies hold relatively conservative portfolios which generate high, sustainable earnings. The question is whether ACC ran its reserve portfolios in a prudent and conservative fashion. Within the portfolio one would expect that there would have been a high proportion of high-quality, highly secure bonds. One would have expected a proportion of the Fund would be invested in high quality shares in companies with very low debt, strong balance sheets, and high quality, sustainable earnings. We know that during the “good years” the ACC portfolio reported extraordinarily good results. But now that the tide has gone out, have they been found to be swimming naked?
If so, one could argue that at least it is in illustrious company. The Big Three auto companies in the US have been guilty of just that kind of behaviour. Like the ACC, at least two of the three are now effectively insolvent. Like the ACC, they are turning to the tax payer to fund them into solvency again.
Here is one of the great weaknesses of socialist commerce. It introduces a terrible moral hazard into operations: taxpayer capital is cheap—it can be garnered via the tax system—which in turn encourages reckless commercial behaviour. With respect to the ACC reserve fund, we suspect that in hindsight this will prove to be the case. We suspect that it will turn out that a good deal of the ACC funds were invested in highly speculative investments—which is an enduring occupational weakness of socialist commerce: money just keeps flowing in through the front door via the taxation system, so investment errors can be covered over—for a time. It will be interesting to see how much of the investment portfolio will have to be permanently written off, as opposed to written down temporarily.
Yes, there will be other causes. We expect that there will have been inefficient operations, featherbedding and layering of costs, blow-outs of medical expenses, a complicit government seeking to win electorate approval by expanding entitlements and coverage—all of which are also systemic weaknesses of socialist commerce.
The larger lesson is plain: whenever state governments move outside their legitimate areas of responsibility into utopian dreams of creating a risk-free society where all harm is compensated by society-at-large, there will eventually be a house-of-cards type collapse. The socialist utopian pretensions of the ACC system are betrayed by its very name: Accident Compensation Corporation. Society (the State) will compensate you for accidents. So, society is to blame for accidents? How stupidly utopian is that!
Scrubone deserves the final mention. He pokes fun at the utopian left winger blog, The Standard, which, running the Labour party line that the present debacle is softening up ACC for privatisation, damns ACC with fulsome praise. He reports that just a few days ago, The Standard was asserting that the “ACC is a worldleading, cheap, efficient system that would be wrecked by privatisation.”
We ask, world leading in what? Insolvency. Hardly—there are plenty more candidates for that around these days. It is just one more shabby collapsed insolvent insurance company. Nothing world leading there. Cheap? Tell that to the employers and car owners and tax payers generally as levies drastically increase. Cheap maybe as in “shoddy” or “worthless.” Efficient? We were unaware that efficient companies were normally to be marked by cost blowouts and insolvency.
The Big Three US automakers are back at the public trough for another slurp. How many times has ACC had to come back for “top ups” or additional slurps in its relatively short history? ACC the envy of the world? Yeah, right.
Several commentators have sought to focus attention upon the financial failure of the Accident Compensation Corporation (ACC). It is a disaster which raises a plethora of vitally important issues. Let us see if we can rehearse some of the most important.
Firstly, it is clear that socialist (state owned) commercial operations are not immune from commercial disaster or failure. In fact, they have a parlous history overall. Adolf Fiinkensein, at No Minister paints the ideological debate in sharp relief when he writes:
It seems the stark reality of what is actually happening with ACC has not sunk into the nation's journalistic mind.Adam, at Inquiring Mind, opines that the magnitude of the problem is significant--he calls it a major scandal--and that a complete and thorough analysis of the causes of insolvency needs to be undertaken. As with most things, there is probably a cluster of causes, each contributing to the debacle. This is almost certainly likely to be the case—as is true when any commercial enterprise becomes insolvent.
This is a crisis of greater magnitude than the 1980s collapse of BNZ but people are only just waking up to it. The collapse is remarkable for the quiet way in which it is being revealed. Little by little by little. There is lots more bad news to come as the full implications of new but uncalculated risks demanded by government over the last nine years have been taken on.
Just imagine the outcry, had a private insurance company, a 'mutual' owned and funded by the policy holders, gone to the wall with projected three year liabilities exceeding assets and projected three year premium income to the tune of between three and four billion dollars.
There would be an uproar of unparalleled savagery. Banner headlines and vitriolic commentary from Trotter, McCarten, Harre, The Standard, Pundit, Poneke and all the rest of the liberal self styled intelligentsia, including ninety percent of the nation's paid journalists. It would be painted as a failure of evil capitalism and the victimization of the Kiwi battler at the hands of grasping rich pricks.
The Serious Fraud Office would be on the job and the passports of directors and senior executives would have been seized by authorities. Charges against directors under the Companies Act would be under way, receivers would be appointed and senior executives dismissed.
That is precisely what should be happening right now with our hapless ACC.
David Beatson weighs in, arguing that there is prima facie evidence of a cover-up on the part of the former government. Thus, along with the commercial reasons for collapse, we have the aspect of venal political “blind eye” syndrome, coupled with the apparent failure to obey the law. If true, there will be departmental collusion with the politicians who determined to “see no evil.”
There is no doubt that the recent financial market meltdown will have contributed significantly to the insolvency of the Corporation. The ACC, like all insurance companies, operated wholesale investment accounts in which “pre-paid” premiums are invested as reserves to fund forthcoming claims. With share markets declining well over fifty percent, the size of the reserve funds will have shrunken terribly. Is it appropriate to blame management and the Board for the market collapse?
Hardly. Management can only be blamed for imprudent investment strategies. Most insurance companies hold relatively conservative portfolios which generate high, sustainable earnings. The question is whether ACC ran its reserve portfolios in a prudent and conservative fashion. Within the portfolio one would expect that there would have been a high proportion of high-quality, highly secure bonds. One would have expected a proportion of the Fund would be invested in high quality shares in companies with very low debt, strong balance sheets, and high quality, sustainable earnings. We know that during the “good years” the ACC portfolio reported extraordinarily good results. But now that the tide has gone out, have they been found to be swimming naked?
If so, one could argue that at least it is in illustrious company. The Big Three auto companies in the US have been guilty of just that kind of behaviour. Like the ACC, at least two of the three are now effectively insolvent. Like the ACC, they are turning to the tax payer to fund them into solvency again.
Here is one of the great weaknesses of socialist commerce. It introduces a terrible moral hazard into operations: taxpayer capital is cheap—it can be garnered via the tax system—which in turn encourages reckless commercial behaviour. With respect to the ACC reserve fund, we suspect that in hindsight this will prove to be the case. We suspect that it will turn out that a good deal of the ACC funds were invested in highly speculative investments—which is an enduring occupational weakness of socialist commerce: money just keeps flowing in through the front door via the taxation system, so investment errors can be covered over—for a time. It will be interesting to see how much of the investment portfolio will have to be permanently written off, as opposed to written down temporarily.
Yes, there will be other causes. We expect that there will have been inefficient operations, featherbedding and layering of costs, blow-outs of medical expenses, a complicit government seeking to win electorate approval by expanding entitlements and coverage—all of which are also systemic weaknesses of socialist commerce.
The larger lesson is plain: whenever state governments move outside their legitimate areas of responsibility into utopian dreams of creating a risk-free society where all harm is compensated by society-at-large, there will eventually be a house-of-cards type collapse. The socialist utopian pretensions of the ACC system are betrayed by its very name: Accident Compensation Corporation. Society (the State) will compensate you for accidents. So, society is to blame for accidents? How stupidly utopian is that!
Scrubone deserves the final mention. He pokes fun at the utopian left winger blog, The Standard, which, running the Labour party line that the present debacle is softening up ACC for privatisation, damns ACC with fulsome praise. He reports that just a few days ago, The Standard was asserting that the “ACC is a worldleading, cheap, efficient system that would be wrecked by privatisation.”
We ask, world leading in what? Insolvency. Hardly—there are plenty more candidates for that around these days. It is just one more shabby collapsed insolvent insurance company. Nothing world leading there. Cheap? Tell that to the employers and car owners and tax payers generally as levies drastically increase. Cheap maybe as in “shoddy” or “worthless.” Efficient? We were unaware that efficient companies were normally to be marked by cost blowouts and insolvency.
The Big Three US automakers are back at the public trough for another slurp. How many times has ACC had to come back for “top ups” or additional slurps in its relatively short history? ACC the envy of the world? Yeah, right.
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