So, what is privatization?

John Key says that the opening up of the present state-monopoly ACC scheme to competitive provision by private insurance companies is not privatisation. See news article. He says “there will be competition and choice” and this has been National’s policy for some time, at least since the failed attempt to introduce competition under 1998 legislation.
Now, National has also pledged not to privatize any state-owned assets in their first term in office. So, there is obviously some confusion here, and it revolves around what privatization actually is, and whether opening up ACC to competitive provision is a form of privatization.
Privatization is the sale or transfer of public assets to the private sector. On the face of it, ACC would not be ‘sold’ to the private sector, as it would remain as a crown entity managing what remains of the state’s obligations to injured people after competitive provision is introduced (if that happens).
But ACC, like any insurance scheme, builds up an asset of reserves which it invests in markets. ACC’s 2007 Annual Report shows a net levy income of $3,290 million, a net investment income of $801.7 million, and investments totaling nearly $10 billion. These reserves are needed to cover future claims liabilities.
Moving to private-sector competitive provision would not mean selling off this sizeable asset to the private sector, as those reserves are there to meet the costs of existing claims.
However, it would mean that the (mainly Australian-owned) insurance industry would gain a compulsory hold on New Zealand businesses’ and households’ premiums to amass their own reserves for investment – and, of course, to help to enrich their shareholders. In other words, the NZ government would be giving them an asset. That’s privatization!
Further, that privatized asset would no longer be transparent to the New Zealand public who have contributed to it. ACC’s accounts are open to the public, and we can see how much ACC is saving and investing on our behalf, and we can call them to account as ethical investors. This would not be possible if such reserves were held by Australian insurance companies. For all we know, these funds could then be invested in tobacco or alcohol companies whose objectives and effects are contrary to the injury prevention and health promotion mission of our present ACC scheme.
So, why would we give away our savings and investments in our compulsory accident insurance scheme to Australians to profit from and to do what they like with? And, let’s not evade the issue. Private competitive provision of accident insurance means privatization!