22 February 2012

ACC: National can't have it both ways on multi-insurer provision

Papers released under the Official Information Act reveal advice from officials to Ministers that raise questions about the effects of the present government's plans to introduce competitive provision of employers’ accident insurance.

A briefing from the Treasury to the Minister of Finance, dated 12 March 2010, advised that “competition is unlikely to lead to reductions in levies in the short term”. Instead, levies may have to rise as private-sector insurers seek to fully fund the costs of capital, marketing and reinsurance – costs which ACC, in its present form, does not have to face.

Both Treasury and the Department of Labour have repeatedly advised ministers that levies for most employers will probably rise under competitive provision – unless there are dramatic cuts to the benefits paid out to people injured at work.

Ignoring this advice, the National Party’s election manifesto of 2011 promised that competitive choice in ACC’s work account will ensure “the lowest cost for levy payers”. And yet it also promised to keep the same criteria for cover and level of entitlements.

The two promises contradict one another according to the government’s own advisors.

While Australian insurance companies stand to gain a new income stream from competitive provision of work-injury cover in New Zealand, it looks like most employers will have to pay higher levies in order to cover the costs faced by those private-sector insurers.

Annual benchmarking of ACC's work account with Australian states’ workers compensation shows that ACC, in its present form, performs well and that Australian insurers do not deliver results superior to ACC.

ACC provides NZ employers with excellent value for money, as well as comprehensive benefits to injured employees. The blinkered approach of the present government favours the interests of foreign insurance companies over local employers and employees. Without cutting statutory benefit levels for New Zealanders injured at work, it is highly unlikely that most employers will enjoy lower premiums under a multi-insurer scheme. The government’s own advisers in Treasury and the Department of Labour have made this point repeatedly.

An October 2011 cabinet paper released under the Official Information Act restates the intention to introduce competition by 1 April 2013. It is time to ask: if the proposal lacks credibility and appears not to be in the interests of New Zealanders, either as employers or employees, then what is the real motive behind it?


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