ACC privatisation will be costly for farmers and taxpayers

22 December 2010 Media Statement

Farmers’ ACC levies will rise dramatically and someone will have to pick up the costs of collapsed insurance companies if National privatises the ACC work account, Wigram MP Jim Anderton says.

“The evidence from Australia is clear: There are huge costs for New Zealand farmers and taxpayers from privatisation. It costs our economy and rewards overseas insurance companies who are currently doing over Christchurch businesses.

"This is no time to reward the insurance industry for bad behaviour."

A report from the previous National-Liberal Government in Australia, comparing accident compensation in Australia and New Zealand in 2004, showed levies in Australia’s competitive market were twice as expensive as those in New Zealand for the primary sector, which is the backbone of the New Zealand economy.

“A competitive scheme could result in a levy hike of as much as 250 per cent for rural people like farmers. Our ACC administration cost is about a third of Australian schemes.”

But Jim Anderton says the hidden cost of privatisation is what happens when a private company goes under.

“It is not just a chance that private insurers could collapse - it is a certainty. And then workers will either be left with no cover or the taxpayer has to pick up the bill. If we are going to pay the bill, we ought to collect the premium.

“In Victoria – where two companies competed so seriously they ran each other out of business – they competed by under funding the tail. When claims that take a long time to emerge come through, the companies that haven’t collected enough in premiums go under. If they’ve slightly misjudged the hidden liability, they can’t suddenly raise premiums on a pay-as you-go basis because they will be competed out of business. But ACC can. That way ACC can avoid overfunding the tail. But when private companies go broke and leave liabilities for long term claims unpaid, what happens to people who suddenly don’t have anyone paying for their health care?”

A report by the Australian parliamentary library on the collapse of Australia’s second biggest insurance company, HIH, is here: http://www.aph.gov.au/library/intguide/econ/hih_insurance.htm

“If National privatises the ACC worker account, the same thing will happen here. Companies will compete by underfunding the tail. Some will collapse. Taxpayers will get the bill.

“In the meantime, high risk sectors such as farming will pay higher premiums. This is one area where we don’t want to catch up to Australia,” Jim Anderton said

“All the profits from private insurance go overseas to Aussie owned insurance companies. The revenue from ACC stays in the New Zealand economy.

“The behaviour of those overseas insurance underwriters is on display right now in Christchurch. They are putting the screws on hundreds of businesses who thought they had adequate cover for business losses.

“This is no time to reward them.”

Ends

© Scoop Media