Cullen hopes to win business over

By RICHARD BRADDELL

WELLINGTON - The Government's determination to reform workplace accident insurance will not do any long-term damage to its relationship with business, says Accident Insurance Minister Michael Cullen.

The move back to an ACC monopoly could well be more strongly opposed by business than any other reform in the past decade but, in an interview with the Business Herald, Dr Cullen said he was not concerned about the impact because it would deliver businesses' reasonable needs.

"I think it is going to deliver proposals for the self-employed which will meet quite a lot of the legitimate concerns expressed by groups like Federated Farmers, and a better accredited employers' scheme," Dr Cullen said.

The select committee reviewing the bill that will roll back the private workplace accident insurance market has received more than 900 submissions, with the vast majority from employers who say the new system has saved them millions of dollars in premiums.

However, Dr Cullen said many of the submissions were from people who had not got to grips with the fact that workers' compensation would be returned to ACC.

"It's almost as though some people are going through a grieving process before the select committee," he said.

But while the principle of the bill was non-negotiable, the Government was encouraging groups to get involved in discussions on the shape of the new accredited employers' scheme (under which employers take on part of the risk) and in third-party management of injuries.

The Insurance Council, he said, had declined to take up the offer, although he conceded that private insurers would have no insurance role in the new scheme, even if they could be contracted for third-party case management and rehabilitation.

But Dr Cullen was keen to modify Labour's election policy, which would have resulted either in a pay-as-you-go scheme or, more likely, one that was partly funded. Instead, he hoped to persuade his colleagues that fully funded was the way to go.

The Government was also determined to ensure that ACC held true to the undertaking to better the average premium of the private sector. Rigorous examination by independent actuaries would counter any temptation to keep rates down by concealing an unfunded deficit that would only emerge years down the track.

However, Dr Cullen was less amenable to changing another key tenet of policy, that of replacing premiums based on actual experience with what he called "observed risk."

Employer groups and others have argued that experience ratings have been key to lower accident rates in the privatised scheme. But Dr Cullen said experience ratings could lead to "game playing," with employers encouraging staff either not to report accidents or, as reported by the Medical Association, attempting to get them classified as non-work injuries.

Observed risk would lead to classifications more closely aligned to the actual risk than those of the largely discredited industry ratings of the past, and there might be room for a small component of experience rating.