ACC to cut employer, worker levies on claim cost clamp-down

ACC to cut employer, employee levies on claim cost clamp-down

By Paul McBeth

July 11 (BusinessDesk) – The government will cut Accident Compensation Corp. levies by $587 million a year after its clamp-down on claims over the past three years pushed its books back into the black.

From April next year, employers will have their annual levies cut by 22%, or $247 million, while workers can look forward to a 17%, or $340 million, reduction in levies, ACC Minister Nick Smith told reporters at the Prime Minister’s Post-Cabinet briefing.

The state-owned insurer has returned annual surpluses of some $2.5 billion after a $4.8 billion deficit in 2007/08 after reining in costs and speeding up rehabilitation times, and was now able to return those savings to tax-payers., Smith said.

“The levy reductions are significant and are possible because of the improved state of finances,” Smith said. Under the previous administration, ACC had “become a de facto health insurer” when it was actually “about providing cover for accidents,” he said.

ACC had managed some $200 million in savings in income claims, $60 million from reduced physiotherapy claims, $16 million in lower administration costs, $12 million from reduced hearing claims, and $8 million in savings on elective surgery, Smith said. That amounted to an overall saving about 15%.

The insurer’s earner’s account, which is paid by wage and salary earnings, is on track to reach 100% solvency in the next year, where equity matches liability, having reached an all-time high 72%, while the motor account was at 66% solvency and still improving, Smith said.

Smith said the strong performance of the investment portfolio didn’t have a bearing on ACC’s surplus, with any return “completely offset” by lower interest rates that pushed up the amount of required capital.

ACC’s work account may be opened to private competition with Smith last month releasing a discussion document putting forward such a proposal in the government’s next term of power. The cost of injuries to the New Zealand economy was assessed at $4.9 billion in 2004/05.

The National-led government campaigned on investigating ways to open up workplace cover to private parties in 2008, and a research note from Merrill Lynch at the time said privatising the workers’ compensation and motor vehicle accounts could unlock up to $2.1 billion in new premium income for net gains of $200 million the industry’s after-tax earnings.

(BusinessDesk)

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