Nats confirm ACC plans

National Party leader John Key has been forced to confirm plans to open workplace accident insurance to private competition, but has denied that amounts to privatising ACC.
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His comments followed revelations by The Dominion Post that a Merrill Lynch broker's report tipped Australian insurers to make a $200 million killing if National went ahead with an "informal" plan to privatise ACC.

Insurance companies expect National to privatise ACC, but their would-be customers, the business community, are surprisingly unenthusiastic.

Insurance Council chief executive Chris Ryan said there was an appetite among insurers to re-enter the workplace accident compensation market.

The Merrill Lynch report suggests privatisation could unlock $2.1 billion in new premium income. Mr Key once worked for Merrill Lynch. Prime candidates for privatisation were the workers' compensation and motor accident accounts.

Mr Key said National's position on ACC would be revealed later this month and was in line with its 2005 election policy.

"We do have an intention of increasing competition and choice. We won't be expanding that or doing that unless we can deliver safer workplaces at a lower cost to New Zealand consumers."

It would not privatise ACC.

Prime Minister Helen Clark said Mr Key's "so-called pledge not to privatise is not worth the paper it is written on".

Associate Finance Minister Phil Goff said competition would raise levies for ordinary New Zealanders, so big business could make a "quick buck".

"Let's be clear, the word `choice' means selling off this world-leading scheme. The insurance industry knows this and are licking their lips in anticipation."

The National government allowed private insurers to compete with government insurer At Work in 1999, but the policy was reversed by the Labour Government in 2000.

"The experience last time was pretty positive for the workplace. The only problem was that it was a little bit short, just being a year. So we would be happy to go back into it," Mr Ryan said.

Insurance companies that would probably have another go included IAG, Suncorp, QBE and Lumley - all Australian-owned - as well as Bermuda's Ace and Germany's Allianz.

In the time competition existed, employers saved a total of $200 million a year in premiums, the number of claims fell by 40 per cent, deaths halved, the return to work rate improved by 50 per cent and disputes fell by 85 per cent, he said.

Mr Ryan said National had made its position clear to the council. "They are committed to competition but we have to wait and see what their policy is when it is released."

Any change to ACC could also be subject to coalition negotiations after the general election this year.

Business New Zealand employment expert Paul Mackay said there was no demand for a move back to a competitive ACC market among employers "and we certainly have not argued for it".

"Our internal thinking is that the issues that flow from doing it probably outweigh the benefits ... and the upheaval outweighs the big three for businesses, which are political certainty, financial certainty and economic stability."

The model lasted just a matter of months in 1999 and "you can be pretty sure that if it were to occur again, that a future Labour government would reverse it again", Mr Mackay said.

The uncertainty that brought was unattractive for business, as well as the insurance industry and politically, he said. Investors were also likely to be cautious about backing insurance companies, many of which fell by the wayside when the market disappeared last time.

"I suspect that overall, privatisation is less likely than it ever has been." Mr Mackay said.

Mr Ryan said it cost the insurance industry about $150 million to enter the market nine years ago.

- © Fairfax NZ News