Premiums may drop in ACC rethink

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Last updated 05:00 19/06/2012

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ACC is in line for a major shake-up, with the two major parties eyeing changes that could see premiums plunge by up to 25 per cent.

Labour is rethinking its ACC policy, and could scrap the fully funded model to revert to a "pay as you go" approach – and yesterday ACC Minister Judith Collins refused to rule out a similar move.

During last year's levy review, the Cabinet agreed to "a review of the funding policy for the ACC accounts and the reasons for the fluctuations in the projections of the ACC's accounts".

Ms Collins said ministers were looking at the funding policy "which could include the stability of the scheme, good process for levy setting and the impact on the economy".

"We're not ruling out anything at this stage."

Labour leader David Shearer said a possible change had not yet been discussed by caucus.

But the party's ACC spokesman, Andrew Little, said it was time for a public debate about funding options, with recent controversy highlighting ACC's overemphasis on lowering costs rather than meeting claimants' needs.

Under full funding the corporation builds up reserves to cover the current and future costs of existing claims, and is aiming to reach that goal by 2019.

Under a pay-as-you-go approach, it would need only enough income in a year to cover annual claims, plus a possible buffer for unexpected costs or disasters.

Mr Little said his "back of the envelope" calculation was that levies could be cut by 20 per cent to 25 per cent if there was a move away from full funding.

That could see the average levy per motor vehicle drop by about $80.

It could also free up billions of dollars for the Government to invest elsewhere, but it is more likely the existing reserves would remain with ACC.

Mr Little said his personal view was that it should retain its reserves.

"It was always expected ACC would build reserves to enable it to meet ... a major civic disaster," he said.

"ACC will still need to have a healthy reserve fund, and it probably has it now."

Mr Little said the pressure for full funding "may contradict the requirement to treatment, compensation and rehabilitation; that might be a contradiction that we need to address".

"It seems to me it is the demands of full funding that lead to the sort of directives from a minister and the conduct of the board and the corporation that leads to the way some long-term claimants are treated and the way that serious and complex claims are being handled."

He had received an "avalanche" of complaints, along the lines of whistleblower Bronwyn Pullar, about the way claimants were treated.

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"Bronwyn Pullar is a symptom of a significant problem."

ACC's annual report showed it had targeted total claims costs of $3.1b but had undershot that with total claims of $2.6b.

It had also exceeded its target of reducing long-term weekly compensation claims by 1150, achieving a cut of 1543.

Its 2011 annual report showed net assets of $17.8b including reserves of $16.6b. Its total outstanding claims liability was $24.5b. Its assets are forecast to reach $24b by the end of this month, against liabilities of $28.5b.

- The Dominion Post

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