INSURANCE COUNCIL
Internet: http://www.icnz.org.nz
MEDIA RELEASE
16 February 2000

COUNCIL OF TRADE UNIONS EVIDENCE TO SELECT COMMITTEE MISLEADING

Evidence provided to the Select Committee on Accident Insurance by the Council of Trade Unions was misleading says the Insurance Council.

The claim by President Ross Wilson that 99% of all employers are paying higher premiums than they would have under ACC is preposterous and clearly unsupported by the evidence of a significant majority of the thousand submissions to the Select Committee.

Mr Wilson claims that only the largest 1% of employers have received benefits from premium reductions in the competitive market.

His interpretation of the Accident Insurance Regulator’s official data released in December has been examined by an independent actuary and found to be significantly flawed.

Firstly, he is basing his figures on a notional premium level that ACC might have charged, but which is highly challengeable and secondly, it ignores the fact that most of New Zealand’s largest organisations are in the service sector and are considered low risk in the setting of premiums. (Editor – please refer to paragraph 6 and Annexure E in attached material from Peter Davies, independent actuary).

Mr Wilson also challenged the assertion by the Insurance Council of a substantial reduction in workplace fatalities with the advent of a competitive insurance market. He used statistics supplied by the Occupational Safety and Health Division of the Department of Labour. These statistics are totally inappropriate for making comparisons and Mr Wilson should have known better than to quote them.

Again independent actuarial advice indicates that taking even the most conservative view, the reduction of fatalities has been at least 25%. The Council asserted in its submission, on the basis of ACC data, that the reduction could be as much as 50%.

Mr Wilson also quoted a Canadian study by Professors Burton and Thomason, asserting that costs may increase by shifting from a monopoly provision of accident insurance to a competitive market model. We have checked this reference with Professor Thomason and he confirms that the quote is out of context and misleading.

Professor Thomason says, “I do not believe our results clearly indicate that public funds are more necessarily more cost efficient than private insurance.” He goes on to say that the Canadian data is from only two provinces and that rates in Ontario at least, may not reflect the true cost of workers’ compensation. He also points out that costs in Washington State, an example of a state monopoly that is often heralded as a success story, are higher than average.

Professor Thomason goes on to say that there is substantial variation in the performance of monopolistic public funds relative to private insurance. This was a point highlighted by a US expert, Greg Krohm who was recently in New Zealand and appeared before the select committee. (Editor – e-mail from Professor Thomason attached)

There is enough doubt around key points in the CTU’s submission to cast significant doubt on its whole credibility. It is more a statement of ideology than of fact, says the Council.

For further information: Chris Ryan
Chief Executive
Insurance Council of New Zealand
025 441-767

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