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A billion to Fix something not broke

30 November 1999

A billion to Fix something not broke

Insurance council sources indicate Alliance pressure appears to be increasing on the new labour majority government to nationalise Accident Insurance.

The Insurance Council is now encouraging Labour to resist Alliance pressure to reverse accident insurance because the support for the accident insurance environment is so strong.

Insurers believe unless Labour stands up to the Alliance on this issue it is doomed to be a one term government.The business community will lose so much confidence in labour they are unlikely to recover the good will they currently have.

Insurers are receiving positive messages from around the country on the new accident insurance environment. Nationalising insurance will cost a billion dollars the Alliance has not included in it's budget.

- re introducing lump sums will cost $144 million
- providing cover for illness by increasing the sickness benefit to cover 80% of earnings ( at average wage of $682.22) will cost $572 million.
- Loss of savings to business $300 million
- Loss of set up costs for insurers $100 million

Nationalising Accident Insurance will be enormously costly for taxpayers because;

- It will cost up to $50 million to rebuild ACC as a state monopoly.
- Govt will right off $20 million in set up costs for it's @work SOE.
- Govt will return to pay as you go which built up an $8 billion "tail" liability.
- Nationalising industry in NZ will damage our international investment reputation.
- Govt Departments will pay $52 million more for ACC premiums.
- Job creators around the country have applauded choice and competition.
- Local govt will pay (Wellington City Council saved $500,000)
- Health will pay (Capital Coast Health saved $1 million)
- Workers will pay ( health and safety jobs have jumped dramatically)
- These factors will devastate the incoming government's first budget.

The Insurance Council believes that the Alliance is now clutching at straws in justifying its ideological stance on accident insurance. The Alliance is currently making a number of wildly inaccurate statements relating to accident insurance, simply because it is unable to identify any faults in the current system. This is despite predictions just months ago that accident insurance would be a disaster.

The Alliance is expected to push for Ms Laila Harre to take the ACC portfolio to keep the pressure on Labour to nationalise industry.

The Insurance Council has no influence over prices quoted by individual insurance companies. However reports coming back to the Council indicate insurers are comfortable with current market prices which have saved workers $300 million. The only reason the Alliance is claiming prices are too low is because there is nothing else they can find wrong with the current accident insurance environment.

Insurers say the gross inefficiencies of the old ACC system produced the lower insurance rates. Insurers are very comfortable with the long-term future of accident insurance.

Insurers say that the consistently used example of rising premiums in Western Australia is simply not an accurate comparison with New Zealand. In Western Australia premiums have risen because the Government had control of the benefit levels and it was the politicians who drove these up. In addition, New Zealand has a no-fault system which makes comparison difficult with Western Australia’s workers compensation scheme.

The success of the accident insurance environment was one of the most significant achievements in the last electoral cycle. Despite attempts to destroy the reforms by a number of interested parties throughout the process, the sheer success means that Labour should not reverse the legislation.
Under ACC Accident Insurance was valued at $1.1 billion making accident insurance an area of enormous impact on New Zealand's fiscal position if it goes wrong and is underwritten by the tax payer.

Insurance companies and employers have indicated that prices are appropriate, but most importantly real benefits in terms of safer workplaces are now evident. This is where the Labour Party should be concentrating its efforts. The fact that the Alliance has concentrated on price structures as opposed to the safety of workplaces indicated their priorities are wrong and that they fail to understand the real nature of success in accident insurance.
When the coalition talks begin and the price of the coalition governments policies are detailed the cost of Accident Insurance nationalisation will be the biggest spending item on the agenda and is likely to be dominated by the Alliance.

It is for this reason that accident insurers are still confident a centre left labour part will ensure the successful business of protecting employees in the workplace through effective insurance will continue.

ENDS
Christopher Ryan, Chief Executive Officer, Tel (04) 472 5230, DDI (04) 495 8001, Hm, (04) 475 9446, Mobile, (025) 441 767

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