Dear ACC
Its been a rough period on the investment side of your business hasn’t it? And those pre-1999 claim debts have to be paid sometime. So maybe levies need to rise across the board. But why are your proposed funding adjustment increases not uniform across levy classes? The average motorist levy increases by 63% while earners and employers respectively get 55% and 52% increases due to system-wide funding adjustments. This loads a disproportionate share of system-wide costs onto motorists. Why have you done it this way?
Secondly, within motor vehicle account, what kind of road-user mix are you trying to promote? The levies you propose for 2010/11:
- are based on a victim-pays mindset for levy-paying victims of road accidents;
- load a disproportionate share of the costs of non-levy-paying victims onto motorcycles; and
- over-charge light trucks and under-charge heavy trucks.
These levies affect the road use choices of New Zealanders. They convey a clear but unfortunate message: encase yourself in as much steel as possible.
When a car hits a motorcycle, it is the biker who tends to need more expensive care. But if the car wasn’t there, it wouldn’t have happened. There are two sides to this event, both equally necessary. So why don’t we charge the motorcycle and car accounts half each of all these costs? Why does the most mashed up victim have to pay the most, when it could never have happened without the other guy? Doesn’t this also weaken the incentive for car drivers to take efficient amounts of care regarding motorcycles?
Also, do you have any evidence to support your apparent view that motorcycles are similar to cars and trucks in their same propensity to inflict costly collision damage on cyclists and pedestrians? By simply counting registered (i.e. levy-paying) vehicles and allocating each vehicle the same share of (un-levied) cyclist & pedestrian costs you further ignore the principle that collision costs be attributable equally to the (levied) participants. Its bad enough that you mis-allocate motorcyclists own costs, adding an excessive share of the un-levied classes, who motorcyclists rarely harm badly, is particularly galling.
Provided you account for collisions properly, I really don’t mind if you differentiate levies between motorcycle types by adding extra classes of levies. But since you have proven able and willing to do this for/to motorcycles, why can’t you also do it for trucks? This quote is from the actuarial advice:
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.
Why not, since you could do it for motorcycles? Basic physics suggests that these must be about the most damaging of all vehicle types to collide with, so this class should be a high priority. This omission distorts efficient choices of vehicle size, unduly tilting the market in favour of larger vehicles.
For completeness, and I’m sure you’re sick of answering this one, I must also the one that some motorcyclist’s 10 year old kid is reputed to have figured out. Can you please explain your public assertions about cars subsidising motorcycles? You said that each car on average subsidises motorcyclists by $77 per year. Thats about $200m of subsidy. So the cost of caring for motorcylists would need to be the $13m of levies from motorcyclists plus the $200m subsidy = $213m. But actually your total bill for motorcylists costs was $62m. Was this just a mistake?
Thanks for listening. And by the way, I really do want answers to my questions.
Yours sincerely
John Small
I’m really enjoying your coverage of this issue. Did you send this letter to ACC or have it published anywhere? I hope this gets picked up on by some of the higher-ups.
Thanks James. I am sending it on to the ACC and have also been bending a few offical ears about it.
[...] Small blogs his ACC submission. He has many questions about the motorcyclist proposed [...]
In respect of the increase to motorcycle levies I would make the following comments. I drive frequently on the open road. On every trip I am overtaken by high powered motorcyles travelling in excess of the speed limit. As often as not the riders are weaving in and out of traffic and overtaking in tight circumstances. The point I would make is that motorcyclists are indulging in an adrenalin sport – lets face it they could buy a lower powered, safer car and drive it at less cost. In the pursuit of their sport they are putting themselves at high risk by, (1) driving at the edge of safe limits, and (2) using a vehicle that has no protection and is unlikely to be able to be stopped safely when the rider is confronted with an dangerous obstacle. I would equate the risk with rock climbing without a rope. Add to this the fact that injured motorcyclist are very, very, expensive to repair. That is why they should pay a higher ACC levy.
The comment from Peter S seems to indicate he (and apparently it’s the same for ACC) doesn’t get that ACC is meant to be a no fault scheme where everyone chips in a bit to pay for cover for all, not one where some pay more than others just because they choose to take a higher risk.
If (as National are clearly angling towards) NZ had private insurance then yes motorcyclists would no doubt pay exorbitant fees, but that is not how ACC works, or at least is not how it’s meant to work.
If Peter S feels that motorcyclists should pay a higher levy does he also think that older people should pay more as they are more likely to fall and injure themselves and the costs to rehabilitate them would be much higher than compared with a young person? What about rugby players, or cyclists, etc, etc. Cyclists have nearly as many accidents with nearly as many serious injuries and fatalities as motorcyclists, yet they pay no extra ACC levy at all.
I recommend Peter S goes to http://www.bikersagainstacc.org.nz or http://www.ACCworks.org.nz (try to forget political leanings and just read the facts page).
@Thornton: No fault does NOT mean no differential rates. ACC charges a higher levy of mining companies than of marketing firms, as they happily point out in their documentation. It just means that we’re trading off the costs of moral hazard for the transactions costs of establishing fault.