Progressive Turmoil

Lying behind the consultation documents issued by ACC is “actuarial advice” available on request, but its not much of a justification for what the ACC is proposing for motorcyclists.

The advice is for the whole motor vehicle account within ACC. It starts off arguing that ACC needs $417 per vehicle to cover its costs. Then it splits this revenue requirement between licensing and petrol sales, both of which are taxed. An obvious way to have avoided the outrage would have been to get a higher share of revenue from petrol tax, but the split between license and petrol revenue is not discussed in the advice.

Then we get to the interesting stuff – how this $417 per vehicle will be shared across vehicle types. ACC say they have examined “the cost of injuries for motorcycles”  and while those costs are not reported, that analysis leads to the reclassification: mopeds come into the pool and there are 3 engine size bands.

Next comes relativities between classes. ACC has

“…reviewed its class relativities this year. This is intended to understand and reduce the level of cross-subsidisation between vehicle classes (p24/5)

Sounds good, but unfortunately they can’t do this directly.

“…ACC does not collect information on the precise vehicle class associated with each Motor Vehicle Account claims. (p25)

“…The CAS information only allows the number of claims in each class to be identified, rather than the claim cost. (p25)

This casts doubt on the accuracy of the earlier analysis of motorcycle injuries, and of the proposed split between bikes and other vehicles. The advice ploughs on into a statistical procedure they used to get some insight into actual claim costs per class, but none of this could be replicated using the information in the report, so a fair bit of doubt remains.

After “relativities” pop out of the statistical sausage machine, some weighting is done.

“…Relativities have been estimated for each accident year since the 2003/04 year, and these relativities are then weighted by vehicle exposure to obtain an overall relativity. A 50% weighting has been selected for the 2008/09 accident year, to reflect the higher level of uncertainty contained in these estimates.  (p27)

Its nice to see that they are acknowledging the uncertainty, but this weighting process is even more obscure than the statistical modelling. A table is presented showing percentages for classes 4 and 5 relative to cars (class 2). Then the advice comments about trends in classes 5/9, even though classes above 5 are not cited in the table. Its all a bit rough and ready.

Then we find out that trucks are getting a sweet deal:

“…The exercise to calculate risk relativities revealed a large difference in risk rates between trucks and smaller commercial vehicles (vans and utility vehicles (utes)), with trucks showing a higher level of risk. This is driven by higher average claim costs. Under the current class structure, trucks, goods vans and utility vehicles (utes) are not distinguished from each other; these vehicles belong to either ACC Class 5 or 9, depending only on their motive power (petrol or non-petrol). If there is a difference in risk between trucks and vans/utes, these vehicles cannot be charged different rates under the current class structure, due to system constraints. (p28)

Great eh? They’re able to create new classes for the purpose of kicking motorcyclists, but “system constraints” stop them doing this for trucks.

Finally, we get told that all of the above are just estimates of the true relativities between ACC vehicle classes, but are not necessarily the rates to be adopted by ACC when setting levies. In particular, ACC needs to ensure that its levies:

• Are appropriate when other factors are taken into consideration, and are reasonable
• Do not fluctuate unduly
• Reflect the appropriate level of cross-subsidisation between vehicle classes. There may be other external reasons to justify a certain level of cross-subsidisation (p28)

Apparently, if the calculated rates were used, motorcyclists would face levy rates far in excess of the current levy rates. So they’ve been nice to bikers, and cut them back dramatically, sticking with the historic relativity which has bikers paying 1.5 times what cars pay on average, but using their motorcycle engine size analysis to load most of that onto big bikes. Another interpretation of this decision could be that they are not very confident of their modelling.

Finally, we get this table that I found utterly impenetrable. It supposedly refers to petrol levies by vehicle class. “The licence levy rates for each class of petrol vehicles under this scenario is calculated as:

Class	Petrol Levy of 9.9 c/l
Cars	$272.72
Tractors,	$95.46
Bikes <125cc	$257.68
Mid size bikes	$511.43
Bikes >600cc	$745.77
Trucks	$291.91

I don’t get this at all. We all pay 9.9c/l, not different prices depending on our vehicle.

Anyway, lets try to wrap this up with a few conclusions.

1. The ACC has obviously been focusing on motorcycle injuries, and feels that it has made some progress in understanding their pattern. The report is not at all convincing however. It could and should have been released with much more information about claim costs by class of vehicle.

2. There is a bias against motorcycles embedded deeply within this whole system. Like pedestrians, we tend to hurt more than car users after a road accident, and maybe we cost more to fix. But unlike pedestrians, we get taxed. So the more we hurt, the more we pay. Its especially galling to see that trucks get a sweet deal since they have the greatest potential to hurt the rest of us.

3. The financial pain is partly a result of the way ACC has chosen to split its revenue requirement between license fees and petrol levies. ACC should justify its split but has made no attempt at doing so, even though they acknowledge that exposure is related to use of roads rather than ownership of vehicles.

That’s enough for now – I’m off for a ride.

This entry was posted on Wednesday, October 28th, 2009 at 8:33 am and is filed under Motorcycles, Transport. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.