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Nats admit knowing ACC shouldn’t be privatised

2 April 2008

Nats admit knowing ACC shouldn’t be privatised

A major independent evaluation of ACC says the world-leading cover it gives injured New Zealanders would be compromised by privatisation and National has finally admitted it knew this all along, says ACC Minister Maryan Street.

“What New Zealanders, who lodge 1.6 million ACC claims a year, need to know now is whether National will actually change its plans to privatise ACC as a result?

“The PriceWaterhouseCoopers report was commissioned by the ACC Board and released on Monday. The last major review of ACC was initiated by the incoming National government in 1990, so a stocktake of the $3.8 billion a year publicly owned scheme – was both timely and appropriate.

“The report says “the ACC under its current government monopoly structure performs as well or better than most other structures” worldwide, is often considered to be “best practice” and provides broader coverage than any other scheme in the world,” Maryan Street said.

“It says the best mechanisms for delivering the employers and motor vehicle accounts in New Zealand is the current state monopoly and there are strong arguments for ensuring serious injuries are similarly catered for.

“National’s ACC spokesperson Pany Wong says “the report tells us nothing we don’t already know”! That is some admission. It’s great National has finally come clean – but this means it’s been misleading voters for years.

“National has been elusive about its ACC privatisation plans through several elections and we now know this is because it was well aware they would result in slashed accident insurance cover for hundreds of thousands of people each year.

“All because it wants to line the pockets of a few insurance companies which will cream off entitlements New Zealanders would otherwise have got,” Maryan Street said.

“The report examines how the scheme measures up against the Woodhouse principles on which it was founded. Labour has always supported those principles based on 24 hour, comprehensive, no fault cover for all injured New Zealanders.”

“National professes to support those principles, but the report confirms what the Labour-led government has always said - that the ability to deliver on them would be seriously threatened by privatisation – in fact it can find no international examples where privatised schemes have done so,” Maryan Street said.

“The report lists of string of negatives which characterise private schemes including: much higher administration costs due to profit and marketing requirements and dispute resolution, the use of lump sum payments instead of weekly compensation which shortchange the injured, reduced focus on vocational rehabilitation and a greater likelihood of people slipping through the gaps because of fragmented delivery and entitlement disputes.

“The cost to taxpayers of privatising the employers account alone in 1999 has been estimated at $45 million. It’s about time National came clean, spelt out its policy and how it can justify the costs of privatising several accounts at significant further expense to the health and wellbeing of New Zealanders and the country’s economy once and for all.”

Other findings in the report.

- Australia uses a mixture of state and private mechanisms to deliver some similar accident compensation services and the report finds ACC employer contributions are substantially lower at 0.78 per cent of wages, compared to an Australian average of two per cent. New Zealand motor vehicle levies are also significantly lower.

- ACC clients return to work faster than their Australian counterparts and ACC has lower claim management and administration rates.

- In the US, UK and several Australian states the use of lump sum payments, instead of the weekly compensation paid by ACC, generally disadvantages clients.Lump sum payments are typically used by private insurers and often fail to cover the needs of people with long-term or serious injuries in particular.

- Research shows private insurers are often less concerned about the vocational rehabilitation of injured clients – and that a significant group of people can miss out on injury cover altogether under privatised schemes.

- A privatised ACC scheme which tried to honour the Woodhouse principles would have to be heavily regulated to make sure private insurers met their obligations and would incur administration costs which were well over 10 per cent higher to ensure profit margins, for example, were met.

ENDS

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