1 March 2000

ACC to match public sector savings

The new re-built ACC will equal or better average premium rates currently offered by private insurance, Accident Compensation Minister Michael Cullen said today.

Dr Cullen was responding to data collected by Act showing savings of $32 million in the public sector since the privatisation of workplace accident insurance.

"I do not dispute the figures. But they do not tell the story Act wants them to tell because Act is making a false comparison.

"Act is suggesting, at least by implication, that levies will be set at the 1998-99 rate when ACC resumes coverage for workplace accidents on July 1.

"But ACC has said repeatedly on the basis of independent actuarial advice that the average levy rate it will be able to offer will match or under-cut the average premium rate now being charged.

"And we know the National Government set the ACC levies on employers artificially high in the year before the transition to private insurance. We also know that those levies incorporated a number of payments which are not included in the premiums charged by the insurance companies.

"The largest of these payments is the 67c per $100 payroll employers are paying to cover the tail. Employers are still paying that, but they are paying it separately to ACC.

"Basically Act is comparing apples and pears.

"And the figures it has collected are meaningless because we don't know the context.

"We don't know if the departments concerned have taken only partial cover and are risk sharing with private insurers in exchange for lower premiums. Neither do we know if their staff numbers have remained steady.

"The Inland Revenue Department, for example, has entered what is called a 'burn contract' under which it has taken on a good deal of the risk in return for a substantially lower premium and has reduced staff numbers by 15 percent over the relevant July 1999 to July 2000 period.

"Act is also failing to take into account the significant improvements achieved by ACC in the last few years. It has managed down the tail [long-term claims] by a third, reduced the duration of claims by 8 percent and reduced the claims rate by 7 percent in each of the last two years.

"These all represent significant cost savings, which the ACC will be able to pass on to its clients in the form of lower levies," Dr Cullen said.

ENDS

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