Why ACC is Broke (Part 3)

Colin Espiner blogs on the mess that is ACC today. For the most part I agree with what he has to say, but one particular sentence stood out. In the midst of a comment about the large increase of fees for motorcyclists (which is somehow “unfair” –  despite that fact that motorcyclists cost ACC far more than motorists each year); in the middle of this, comes this sentence:

“Ramping up motorcycle levies also flies completely in the face of all the rhetoric from the Government about reducing congestion, cutting carbon emissions, using less petrol, etc etc. Not to mention parking.”

My immediate thought is – what do traffic congestion, carbon emissions, petrol consumption and parking have to do with accident insurance? (answer: Zip. Nada. Nothing.)

This is a perfect illustration of why the government should be selling off all interests in ACC, electricity companies, railways and TVNZ, to name but a few. Every government, without exception, places constraints on businesses run in its name, constraints which have little to do with the business and much to do with the current government’s ideology and pursuit of the populist vote. National are slightly more restrained in this regard, but only slightly.

Many of these constraints are not particularly conducive to  running a business. To take the current example: how many accident insurance companies would offer cars with lower petrol consumption lower premiums? How many would offer lower premiums to those who rode motorbikes and bicycles to work? How long would it take before they were broke? In a competitive environment, the intrinsically dangerous motorbikes and smaller cars would gravitate to the lower premiums you offered and the larger, safer vehicles would move to another company. In a monopoly environment like ACC, the larger vehicles would become smaller vehicles and motorbikes, making the greens very happy while seriously pushing up accident costs. Eventually, ACC would be broke, even with its monopoly.

Multiply this effect by the hundreds of areas where governments have made political, instead of business, decisions and it is small wonder that ACC mushrooms liability like a damp forest. I know of no other insurer operating in the same illiquid financial position as ACC. I am not even sure it would be legal to operate an insurer on that basis without being underwritten by the long-suffering taxpayer.

The formation of SOEs has helped to alleviate this situation for many of the other businesses that the government owns, allowing the SOE to pursue opportunities with less constraint. Unfortunately, there is still plenty of pressure from the major shareholder to stay close to the policy line of the government. Witness the pursuit of renewable sources of energy virtually to the exclusion of cheaper coal and oil fired production (which is why we pay so much for power). Witness the somewhat schizophrenic programming of TVNZ (which is why I switch it off). As for Kiwirail – does anyone know of any entity, besides a government, which would sell something at a large discount, buy it back at a premium and then proceed to shower this marriage of incompetence and stupidity with confetti in the form of your tax dollars? No. I don’t either.

SO this is not simply why ACC is broke, this is why the government is broke. It is why New Zealand is broke. The government injures businesses, simply by being the government. It forces businesses to follow policy rather than profit, to the detriment of either the business (in terms of viability), the consumer (in terms of higher premiums and costs) or both (as with ACC). The net result is we are all poorer.

There are things that governments should run, of course. Police and the Military and Welfare come to mind immediately. None of those should be run with a profit motive and tax dollars are needed to run them (Hard-line libertarians would probably disagree with me here).  But most things should at least have the question asked – Why does the government need to run this? And if the justification is couched only in ideology, the answer is really NO.

The government has tentacles that reach far further than the realm of “Nanny State”. They reach into the world of commerce as well as into our family homes. While we are busily chopping off the ones on our doorstep, others are busily sucking the life out of the economy. It is time to cut those businesses loose and let them thrive or die.

ACC would be a good start.

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