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ACC levies 2002-2003

4 December 2001 Media Statement

ACC levies 2002-2003

The government has rejected ACC’s recommendation that emergency service vehicles be required to pay levies, as they are an integral part of the emergency response to accidents and events where injuries can arise.

ACC Minister Lianne Dalziel said both ACC and emergency service vehicles played important roles in response to accidents.

“For that reason, the government decided that it was entirely appropriate for emergency service vehicles to continue to be exempted from the Motor Vehicle levy.”

The Minister also detailed the government’s decisions on ACC levy rates for 2002-2003.

“The Employers’ levy remains the same at an average 90 cents per $100 of payroll. Although ACC recommended a reduced levy rate of 85 cents, the government decided there was a need to give employers some stability in levy rates from year to year, as well as building up reserves. I am pleased to note that employers have improved practices by setting up strong health and safety measures.

“Last year, ACC announced an actuarial loss of $313 million. This is a precautionary approach.

“The Self-Employed levy increases to $1.75 (up from $1.35). That increase is the result of increased claims and the costs of managing those claims. Self-Employed have the ability to nominate the level of compensation through the CoverPlus Extra Programme.

“The Earners’ Account increases slightly from $1.10 to $1.20, and the Residual Claims levy remains the same at 35 cents.

“The Motor Vehicle levy, from which emergency service vehicles are still exempt, increases from $128.45 to $141.10. One of the issues we have had to grapple with has been the Motorcycle levy which will increase from $138.81 to $217.50. Motorcyclists have been funding between 12%-22% of the total costs of injuries from accidents that involve motorcycles. Despite the levy increase, motorcyclists will still only fund 35% of the total cost of injuries from motorcycle accidents.”

The new rates take effect from 1 April 2002, with motor vehicle relicensing from 1 July 2002.

ENDS

ACC Levy Rates 2002-2003

- New rates take effect 1 April 2002, motor vehicle relicensing from 1 July 2002.

- Recommendations include the expected impact of changes in the range and scope of benefits contained in the Injury Prevention, Rehabilitation and Compensation Act 2001.

- Levies are calculated on a fully-funded basis.

Process

- ACC consultation on proposed rates commenced 23 August 2001 and closed 20 September 2001. (Residual Claims Account consultation concluded 27 September.)

- ACC Board recommends rates to the Minister for Accident Insurance, Gazetted 18 October 2001.

- Government considers the recommendations taking additional advice from the Department of Labour.

- Government considers ACC recommendations and sets new rates for 2002/2003.

ACC Levy Rates 2002-2003

Questions and Answers

General

What are the new rates?

Account Current Rate New Rate

Employer (average) $0.90 $0.90

Self-employed (average) $1.35 $1.75

Residual Claims Levy (average) $0.35 $0.35

Earners’ $1.10 $1.20

Motor Vehicle (standard vehicle)

Motorcycle $128.45

$138.81 $141.10

$217.50

When do the rates take effect?

1 April 2002, except motor vehicle that commences 1 July 2002.

Why did the government not accept all of ACC’s recommendations?

Last year the Corporation announced an actuarial loss of $313 million. The government has adopted a precautionary approach because it is not prepared to have ACC dip into its reserves again this year. The basis of a fully funded scheme is to have reserves to meet the full costs of all claims. The reserves must be built up to allow this to happen. If ACC is able to meet its targets this year then the time required to build reserves will be reduced.

There is no increase in the employers levy - it remains the same. With respect to the self-employed and the earners levy increase, these were in line with the recommendations of the Department of Labour.

What is the difference between pay-as-you go and full funding?

Under pay-as-you-go ACC collected levies to meet the costs of all claims managed in that year. No reserves are required to fund the existing claims liability.

Under full-funding ACC must collect the full cost, for the life of the claim, for injuries that occur in the levy year. This requires ACC to establish reserves to meet the future costs of current claims.

Do the levies include the expected impact of changes in the range and scope of benefits contained in the Injury Prevention, Rehabilitation and Compensation Act 2001?

Yes these changes have been taken into account.

What is the government doing to reduce the cost and number of claims?

The government has worked with ACC to establish programmes to encourage employers to improve their injury prevention and injury management. The programmes include ACCWorkplace Safety Management Practices and ACCPartnership Programme.

These measures along with the new health and safety legislation combine to make our workplaces safer.

ACC is also working to reduce injuries on the road, in the home, on the sports fields and in the community. ACC is also developing a New Zealand Injury Prevention Strategy.

How can employers and self-employed people find out their individual levy classification rates?

The new rates can be found on ACC’s website www.acc.co.nz from Wednesday 5 December. The details of this announcement can be located on www.executive.govt.nz.

Employers’ and Self-Employed Account

Why has there been an increase in the self-employed account when there has been no change in the employers’ account?

The employers’ account has experienced the benefits of a reduction on work-related injuries and therefore costs associated with the account. Unfortunately the same cannot be said of the Self-Employed account where there has been a significant increase in both injury rates and associated costs. ACC will be focusing its attention on developing injury prevention strategies for the self-employed in line with similar efforts for employers.

Motor Vehicles

Why have the levies for motorcycles increased by a higher amount than other motor vehicle levies?

Although the number of claims for motorcyclists has decreased recently. The costs per claim have increased as the scheme has shifted to a full-funded basis. Injuries from motorcycle accidents tend to be of a more serious nature, a longer duration and consequently a motorcycle claim can continue for several years. Motorcycle claims represent a higher percentage of ongoing motor vehicle claims than they represent of “new’ vehicle claims.

Motorists have been cross-subsidising the cost of motorcycle injuries to the tune of 75-85% over the years. Cross-subsidisation will still occur, as the new rates mean that motorcyclists are still only funding 35% of the costs of accidents involving motorcycles. The other 65% will be spread across the account.

What is ACC doing to reduce the costs and incidence of motorcyclist injuries?

ACC will shortly be introducing a campaign developing motorcyclist injury prevention. This campaign follows considerable consultation with motorcyclists and other interested groups (AA, LTSA, Police).

It is said that motorists “cause’ the vast majority of crashes with motorcycles, so why did the government agree to the recommendation?

Statistics from LTSA dispute this “cause’ opinion. In the five years 1996-2000, there were 4757 motorcycle crashes resulting in death or injury. Of these crashes 23.8% (1133) were single vehicle crashes. A total 76.2% (3624) were multiple vehicle crashes.

In 48.3% (1749) of the multiple vehicle crashes, the motorcyclist was deemed to be primarily at fault, or at least shared some fault. In 80.8% of the single vehicle crashes, the motorcyclist was deemed to be at fault. Overall motorcyclists were considered to be exclusively or primarily at fault in 47.3% (2250) crashes.

However, ACC is essentially a no-fault scheme. If motorcycle levies were increased to cover the full cost of their injuries, then they would be three times the rate set.

Why did the Government not accept the recommendation to charge the motor vehicle levy to Class 1 Emergency Vehicles?

These vehicles are an integral component of the emergency response to accidents and removing the exemption would result in increased claim costs. It was felt that the subsidy was appropriate under these circumstances.

Employers’ Account

At A Glance:

Current Rate average 2001-2002 per $100 of payroll New Average Rate

2002-2003 ACC Recommended Rate Department of Labour Recommended Rate

$0.90 $0.90 $0.85 $0.85

General

- The account meets the cost of all workplace accidents since 1 July 2000.

- 550 risk rated industry levy classes based on services provided or goods produced. Each class has an industry levy rate used to determine the employer’s payable levy, based on liable earnings.

- Employers have the opportunity to receive a levy discount of between 10%-20%, in recognition for meeting and maintaining workplace safety standards under ACCWorkplace Safety Management Practices.

- Large employers continue to have the option of becoming fully self-managing under the ACCPartnership Programme.

History Of Account

- ACC has only had one year’s experience with this account since its return to ACC.

- Claim numbers for work-related accidents have increased slightly since March 2001, and there is some evidence of an upward trend.

- The following graphs show the claim frequency and cost of claims for both the employers’ and self-employed accounts. Levy rates are determined using the claims cost per $1million liable earnings. The claim frequency tells us how often injuries happen, not how much they cost. The total claims cost takes into account both the frequency of accidents AND the severity (ie, the average cost per claim).

Self-Employed Work Account

At a Glance

Current Average Rate 2001-2002

New Average Rate

2002-2003 ACC Recommended Rate Department of Labour Recommended Rate

$1.35 $1.75 $1.69 $1.70 - $1.80

General

- Self-employed Work Account Levy meets the costs of all self-employed work injury claims from 1 July 1999.

- This levy has 2 components:

- an income-benefit portion to fund income-related benefits (weekly compensation) and

- a non-income benefit portion to fund non-income related benefits (independence allowance, medical treatment costs, social rehabilitation).

- 550 risk rated levy classes based on services provided or goods produced. Each class has a levy rate used to determine the self-employed person payable levy, based on liable earnings.

Reasons for Increase

- Recent increases in claim frequencies and costs of managing claims mean the average levy for 2002/03 will increase. The need to build reserves in this account also impacts on the increased levy.

History of the Account

- The account is new (since 1999) and has limited historical evidence to draw on.

ACCCoverPlus Extra

- Allows self-employed some flexibility of cover for personal injuries.

- ACC standard cover injured self-employed who need weekly compensation receive up to 80% of the previous year’s liable earnings. This standard cover may not suit people with fluctuating incomes eg, farmers.

- ACCCoverPlus Extra allows self-employed to agree, with ACC, the level of weekly compensation they would receive if they were unable to work.

- ACCCoverPlus Extra up-take rate has significantly increased.

Residual Claims Levy

At a Glance

Current Rate 2001-2002 per $100 of payroll New Rate Average

2002-2003 ACC Recommended Rate Department of Labour Recommended Rate

$0.35 $0.35 $0.35 $0.35

General

- Residual claims levies are collected to fund pre-1999 work injury claims and pre-1992 non-work claims for earners.

- 550 risk rated levy classes based on services provided or goods produced. Each class has a levy rate used to determine the employers payable levy, based on liable earnings.

History of Account

- Previous collection of ACC levies was on a pay-as-you go basis. This led to a build up of long-term liabilities for these injuries. The residual claims levy will fund the current costs of those pre-1999 claims and establish reserves to match future liabilities.

Motor Vehicle Account

Standard (Class 2) Motor Vehicle - At a Glance

Current Rate 2001-2002

Per standard vehicle New Rate

2002-2003 ACC Recommended Rate Department of Labour Recommended Rate

$128.45 $141.10 $141.00 $141.00

General

- Levies are collected from two sources:

- An excise duty on petrol sales (2.3 cents per litre) and;

- A portion of the annual vehicle licence fee.

- Annual licence fee portion is assessed on a fully funded basis and consists of two components:

- A motor vehicle levy which funds the cost of injuries which occur during the levy year; and

- A prior claim levy, which will fund the ongoing costs of claims, which occurred before 30 June 1999.

- Rates for different classes of vehicle apply.

- Class 2 vehicles include: goods service vehicles, motorcars, self-propelled caravans, mobile cranes, passenger service vehicles, all motor vehicles not elsewhere classified.

- Class 3 vehicles include mopeds, tractors, veteran or vintage motor vehicles, non-registered vehicles.

- Levies for this group have been split. The current rate is $44.98. The new rates are as follows:

- Petrol vehicles: $49.39

- Non-petrol vehicles: $58.14.

Increase due to:

- Increasing rehabilitation costs for serious injuries ;

- Previously funded on pay-as-you-go basis, now need to build reserves.

Other ACC recommendations Government decision

Service vehicles (ambulances, fire service vehicles and hearses) which are currently exempt be subject to levies. (class 1 vehicles) Emergency service vehicles continue to be exempt.

Non-petrol trucks pay an additional annual levy on the licensing fee of $35. To be collected with relicensing. As recommended.

Non-petrol cars pay an additional annual levy on the licensing fee of $25. To be collected with relicensing. As recommended.

History of Account

The severity of the injuries in this account means that a relatively small increase in injuries can result in a significant increase in cost to the scheme.

A Closer Look at Motorcycles (61cc and above)

Current Rate 2001-2002. New Rate

2002-2003 ACC Recommended Rate Department of Labour Recommended Rate

$138.81 $217.50 $217.50 $217.50

General

- The motorcycle levy differential will be increased from 105% to 150% of the class 2 rates for standard vehicles.

- Motorcyclists are still only funding 35% of the costs of accidents involving motorcycles - the remaining 65% of costs will continue to be subsidised by other motorists.

Increase due to:

- The levies paid by motorcyclists historically have not funded the actual costs of the accidents they are involved in - ACC data from 1995/96 to 2000/01 reveal that motorcyclists have only been funding between 12%- 22% of the total costs of accidents involving them.

- LTSA statistics for 1998 reveal that motorcyclists are 5.2 times more likely to be involved in motor vehicle accidents, than other vehicle owners, and ACC claims establish that when an accident occurs the results are likely to be more severe.

Earners’ Levy

At a Glance

Current Rate 2001-2002 per $100 of earnings

(GST inclusive) New Rate

2002-2003 ACC Recommended Rate Department of Labour Recommended Rate

$1.10 $1.20 $1.10 1.20

General

- Earners’ levy meets the costs of non-work injuries to earners, and also residual claims from 1992 - 1999 which occurred after 01 April 2002.

- Levy is collected by IRD and is incorporated in the PAYE tables.

Reason for Increase

- Main reasons for this increase are a higher number of new claims and the need to build-up reserves in this account.

History of Account

- This account was established in 1992.

- The Earners’ Account is relatively stable. However, ongoing claims are increasing as the account is still in the growth phase - long-term claim entries exceed the number of exits.


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