ACC to face private competition

Labour says Government proposals to give employers a choice in their work-related personal injury insurance provider is privatisation, pure and simple.

The well-signalled change, to be introduced from October next year, was among proposals detailed in a discussion document on ACC reforms released today.

ACC Minister Nick Smith said the proposals were not about privatising ACC, but removing its monopoly and keeping up the pressure for it to perform.

"The Government is committed to retaining our unique 24/7 no-fault system and workers' entitlements but wants to improve the incentives for safer workplaces, better rehabilitation and greater cost effectiveness."

But Labour's ACC spokesman Chris Hipkins said New Zealanders would end up forking out more for less under the changes.

"The only way the private insurance industry will make money from taking on ACC's role will be by reducing entitlement or increasing costs. Either way, Kiwis will lose."

He said Smith was trying to "dress up" the proposal as increased competition, when the changes amounted to "privatisation, pure and simple".

Labour would reverse the changes if it became the government at the election.

PROPOSED CHANGES

Key requirements for those opting for private cover would include maintaining existing minimum worker cover and entitlements, and minimum prudential standards for insurers.

Also proposed is a market regulator to monitor and enforce compliance from employers and insurers, a single claims lodgement unit to streamline claims and the setting up of an independent disputes resolution service.

"These reforms are about getting business to view ACC not as a tax but as a manageable cost that can be reduced with improved safety,'' Smith said.

"'This policy is all about choice. Employers and the self-employed will be able to continue with ACC or, if they wish, purchase insurance from another provider. These are not radical reforms.''

BusinessNZ chief executive Phil O'Reilly said he supported the general direction of the proposals.

"Providing choice and competition in the work account will allow insurance and rehabilitation packages to better meet the needs of workplaces and employees," O'Reilly said.

''The Government does not have to be a monopoly service provider to meet its social and economic objectives. The ability for the private sector to take part in the workplace accident insurance market will help bring more resources and innovation to the sector, to the benefit of employees.''

BusinessNZ said it also welcomed the extension of the accredited employer scheme.

''This scheme allows firms to manage their claims and achieve better safety outcomes,'' O'Reilly said.

The insurance industry cautiously welcomed the move.

"This is a relatively small offering - an evolutionary process," said Chris Ryan, chief executive of the Insurance Council. "The key thing will be the cost of it."

The insurance industry could access a pool of capital to write such workplace-insurance cover, though reinsurance costs have surged after a spate of natural disasters, he said.

NO-FAULT COVER

New Zealand's ACC scheme was started in 1974 as a 24-hour, no-fault cover for injury. The ACC collected $744 million in levies in the Work Account for 2009/2010 from more than 550,000 employers and self-employed people.

The cost of injuries to the New Zealand economy was assessed at $4.9 billion in 2004/2005, the discussion document said.

The CTU said the proposals were not about increasing choice but about selling off ACC's work account.

CTU secretary Peter Conway said there was no evidence the changes would have better cost or safety outcomes.  

He said ACC was proven to have cheaper administration costs, lower levies and fewer disputes than the Australian system and better rehabilitation outcomes for clients.

''Claims will be contested much more strongly and workers will be left fighting both their employer and their employer's insurer to avoid coverage of an accident.

''We know that international private schemes have an average of 19-24 month delays for legal resolution of claims. This will not improve safety, rehabilitation or the efficiency of ACC.''

Conway said insurance companies would aggressively price initially to cherry pick clients and cases, leaving ACC to pick up the losses of companies that go bust and take on cases the private insurance companies wouldn't touch.

''Increasing insurance costs will lead to pressure by business on Government to reduce entitlements further, dismantle disputes processes and allow more and more parts of ACC to be shifted to the private sector. This is just the beginning.''

The Department of Labour would accept submissions on the proposals until July 15.

'KEEP ACC KIWI'

Protests outside Sky City ahead of the announcement were led by ACC Futures Coalition organiser and lawyer Hazel Armstrong, who said privatising workplace insurance would do little for workers while "gifting" Australian insurance companies a $200m "windfall".

About two dozen protesters waved union flags and banners, shouting "Keep ACC Kiwi" outside the minister's briefing.

Armstrong said the minister's discussion document was "a side show" to distract from the likelihood of a significant flow of profits overseas.

"The reality is it will put costs up. Treasury has said that ACC is considerably cheaper than private insurers so in a few years' time we'll find that overall, employers are paying more.

National Distribution Union general secretary Robert Reid said the Government's attitude towards workers in general was worrying.

"There's this overwhelming move away from the health and safety system and ACC system as we knew it, which was one of the best systems in the world for workers and is now turning into the opposite."

- BusinessDay.co.nz, with NZPA and BusinessDesk