New Zealand motorcyclists have been protesting the new levy rates they face as deeply unfair. The ACC Futures Coalition thinks they have a very good point. 

ACC forecasts the lifetime cost of motorcycle injuries at around $266 million per year in the current levy cycle. While motorcycles make up 4 percent of the vehicle fleet, motorcycle accidents represent 25 percent of the cost to ACC of all injuries from road crashes.

ACC suggests that “to keep things fair, the amount motorcycle riders contribute is increasing, to better reflect the risk”. They contend this “fairness” is achieved by shifting more of the current cost of accidents covered by the Motor Vehicle Account (MVA) from cars to motorcycles, especially to large bikes, to reflect the high risk and high cost of accidents involving a motorcycle.

There are enormous problems of allocating the costs of accidents to particular activities, and fortunately the motor vehicle levy is an outlier – most of ACC is not organised on this basis.  Motor cyclists tend to come off worse in a collision than other road users (requiring greater financial investment to rehabilitate), however they highlight that usually it is not their fault and the costs should be more broadly shared. ACC’s position is based on the observation that37% of motorbike accidents do not include another vehicle. 

Using that 37% statistic, Government’s policy is not to make motorbikes pay their full share, but to align their share from 28% to 37% of the motorcycle costs by 2027. 

ACC Futures highlights the several critical errors in this reasoning.   Most plainly, if the principle is truly risk-based pricing, then one might expect motorcyclists eventually to pay 100% of motorcycle injury costs.  ACC’s levy adjustment does not achieve this policy objective.

However, ACC has deliberately not adopted that approach. It continues to have a large cross-subsidy from other motorists because it recognises that the Motor Vehicle Account retains an important social insurance element.

There are many other problems.  For example, while motorcycles are increasingly charged according to the injury costs associated with that vehicle class, e-bikes and e-scooters that also generate increasing ACC claims are exempt from registration. They therefore do not contribute to the Motor Vehicle account with separate ACC levies.

Increasingly the funding of the MVA with different levies on different vehicles is ultimately an administrative nightmare, with little to do with proper risk allocation or accident prevention.

There is a deeper problem with the ACC’s logic that imposes large rises on the motorcycle class. Motorcycle injuries are very expensive but at least a third of the cost relates to earnings-related compensation. 

Weekly compensation is not related to the type of vehicle involved. It is determined by the injured person's earnings before the accident.

Someone earning $250,000 receives a much larger weekly compensation entitlement than someone earning $60,000, regardless of whether the accident involved a car, motorcycle or another vehicle.  As weekly ACC compensation is based on earnings, there is a very good case for it to be covered from the Earners' Account, where levies are already based on earnings.

Moving weekly compensation costs to the Earners' Account would better align the way ACC is funded with the benefits it provides. The Motor Vehicle Account could fund the treatment, rehabilitation arising from this year’s road crashes with a simple flat rate levy, while income replacement and future lifetimes costs would be funded through the existing earnings-based flat rate levy.

That approach would strengthen ACC as a social insurance scheme instead of continuing the drift toward increasingly controversial risk-rated levies.

Finally, the ACC Futures Coalition notes  a discount to that levy is awarded if motorcyclists complete the ‘Ride Forever’ course: www.rideforever.co.nz. While this might help safety, a discount does not depend on, nor require, nor justify  ACC’s unsound motor vehicle levy scheme.