Editorial: ACC on the sick list

New Zealand's accident compensation scheme has long been sold to us as being the envy of many other countries. It is a one-off, a no-fault scheme that provides cover for anyone injured in an accident through a state-funded insurance scheme.

At school New Zealand kids were taught about the scheme and our national pride in it, mostly because of the way it provided a safety net for people in times of strife.

The polar opposite, we were taught, was the American system where individuals could be sued for huge amounts for accidents that, to all intents and purposes, were outside their control. Even worse than the litigious American system was that nation's health insurance scheme, which meant that if you were poor and uninsured you were automatically a second class citizen when it came to health.

In contrast, with our national health system and the protection of ACC, we had a gold-plated system that was the envy of the world. It was egalitarian, robust, and the mark of a civilised nation. Or so we were taught.

In 2009 there are serious signs that ACC is creaking under the strain. That may be putting it mildly. John Judge, the ACC board's chairman, said last week ACC's existence was under threat because of a growing expanse of blue water between its income and its massive liabilities. Mr Judge, who was appointed by the National Government, believes ACC has been underfunded for a number of years. National politicians believe this is because ACC morphed from being an insurance scheme into a sort of super mini welfare state for everyone in need.

ACC has been a political football for a long time now and Nick Smith, the ACC Minister, has made it clear he is gunning for a major shake-up. Opposition politicians have accused him of having a grand privatisation scheme for ACC, which would see its assets sold off to private insurers. For the moment at least this theory does not hold water because of one simple fact: ACC is a lousy business. It has lost $7.2 billion in the past two years and its outstanding claims liabilities are toughing the $24 billion mark. It would be difficult anyone foolish enough to take on a financial disaster.

If, as Labour would have us believe, there is a privatisation scheme in the works, it will have to involve hiving off the parts of ACC that other insurers will be willing to take on. The unworkable or unprofitable parts will have to be bundled back into a Government scheme. And somewhere in the middle the romantic notion of a Government-funded no-fault system will have to be modified in a politically-acceptable way.

It is a Herculean task and one that will provide a stern test for the National Government. Whatever happens in the long term, what is crystal clear today is that taxpayers will have to dig deep to get ACC out of the mire. Having a unique highly regarded system is great in theory. It is also extremely expensive.

The Timaru Herald