Disbanded insurer will cost big money

By RICHARD BRADDELL

WELLINGTON - The Government's resolve to disband its workplace accident insurer @Work will cost millions of dollars - but just how many millions remains a matter of conjecture.

The crown entity set up to contest the privatised workers' compensation market has already started racking up redundancy costs.

It laid off nine of its 45 staff this week.

An @Work spokesman said the staff displaced were mainly in sales and marketing.

They had been given a month's notice because of the sharp drop in work load - perhaps not surprising, given that the company is to be disbanded.

Redundancy costs could be substantial.

According to the annual report, chief executive Sam Knowles earns between $310,000 and $320,000, while seven others get more than $100,000.

However, @Work yesterday denounced as inaccurate speculation reports that a severance package worth $1 million for Mr Knowles had been negotiated.

To get @Work going, the Government provided $149 million in cash and the company disclosed a $15 million loss in its June 1999 accounts due entirely to set-up costs.

But the book loss could be even greater, given that the value of @Work's equity was held at $165 million in those accounts.

The Institute of Economic Research has estimated that it could cost the Government a further $20 million spread over three years, with $6.7 million being written off in each those years, to wind up @Work.

That estimate was based on a press report in which the Insurance Council's chief executive, Chris Ryan, said it cost $20 million to set up @Work.

It has been dismissed as "pie in the sky" in other quarters.

@Work is to present its half-year accounts on Monday and is expected to announce a result significantly better than its budget, a factor which should help ease the financial pain of winding it up.

The fact that the company also got less of the privatised market than budgeted has also already been cited as likely to result in an early return of some capital to the Government.

The question also remains of what will be done with intellectual and software property developed by @Work.

Mr Knowles has said in the past that leading-edge quoting software developed by @Work would be attractive to similar organisations overseas.

The company said it would seek to realise what value it could from its assets.