Editorial: Reforming ACC

22:22, Jun 19 2012

When New Zealand's accident compensation system was introduced more than 30 years ago, providing universal coverage for anyone who suffered an accident with no need to establish fault, it was seen not just as a huge improvement over the existing system but also as a world-leading breakthrough.

It was designed to ensure that no-one was left destitute by an accident.

It was also designed to do away with costly, time-consuming and uncertain litigation of the kind that continues to clog courts in the United States, where accident victims have to try to establish that someone was at fault and the extent of the fault before they can recover any compensation for injuries they have suffered.

While it is true the ACC system has many benefits, and no-one would now do away with it (although it should be remembered that no other country has been tempted to imitate it), even now, three decades on, its true purpose and the way it should be run continue to be politically contentious.

The recent row over the Bronwyn Pullar affair is only a symptom of the temptation of all governments to meddle.

The process through which ACC must go to set its levies is particularly susceptible to political interference and both Labour and National- led governments have succumbed to that temptation.


This week the Labour Party has suggested a major change to ACC's overall funding policy. The Minister in charge of the ACC, Judith Collins, has declined to rule out a similar move by the Government.

Labour's caucus has not yet discussed the matter. The Government, however, agreed last year to review ACC's funding policy.

The incentive, as always, is to arrive at lower levies. In doing that, however, the risks also have to be properly evaluated.

At present the Government is committed to making the ACC fully funded, as a private insurer must be, by 2019.

That means it must build its reserves to cover the current and future costs of existing claims and it is well on the way to that goal.

The alternative pay-as-you-go approach would need only enough income each year to cover annual claims, plus a buffer for unexpected costs or disasters.

Full funding is a powerful incentive to the organisation to keep its long-term costs under control. The argument against fully funding ACC's liabilities is that it is not a private insurer which has the risk of going bust.

It is, rather, owned by the government and the government could absorb the risk of its becoming insolvent.

At base in this argument is whether ACC is a welfare agency or an insurer. As originally envisaged, it was meant to be an insurer and that is surely the sounder view.

ACC exists to provide fair coverage as defined by its legislation for the consequences of accidents, including assisting and encouraging accident victims to take care of themselves as soon as possible.

It must be run as a sound business and not something creating a potential liability to government's shaky finances.

The Government not long ago reviewed ACC and recommended a number of sensible changes. Among them were a proposal to open some ACC accounts to competition, change it to a state-owned enterprise and allow it to set its own levies.

Although these ideas would help set the scheme up on a sounder footing and give it the independence it needs, the Government in the recent tumult seems to have retreated from them.

It should dust them off again.

The Press