Employers paying less in premiums

By RICHARD BRADDELL

New Zealand employers are paying a third to a half less than their Australian counterparts for workplace accident insurance, says ACC.

Chief executive Garry Wilson yesterday announced a $69.5 million surplus for the six months to last December 31. But he said that since the 1999-2000 year, premiums had dropped an average $1.47 per $100 of wages, to 85c, for the year beginning next April.

Reductions across all accounts - earners, self-employed and motor vehicles - have resulted in a $486 million saving over the past two years.

The ACC surplus, which included a $33 million jump in investment income to $133 million, was helped by the gradual transition from pay-as-you-go to fully-funded. This has resulted in the accumulation of more than $3.5 billion in reserves, which will be invested.

But although a $300 million rise in premium and other income to $1.1 billion was largely due to the return of workers' cover to ACC last year, it was nearly matched by a $281 million rise in expenditure to $1 billion.

The corporation's emphasis on early rehabilitation drove compensation benefits down by $17 million to $356 million, but the cost of providing rehabilitation jumped $92 million to $377 million.

The largest change in expenditure related to a $172 million non-cash charge to ACC's long-term claims liability, with a further $350 million not included at this time.

Mr Wilson said the outstanding $350 million "adjustment" reflected a 1 per cent drop in the discount rate, which in turn reflects falling interest rates. Because interest rates are changing, it will require constant adjustment. ACC executives agreed that the adjustment would not have to be made once full funding was achieved, but Mr Wilson said a reduction in the 15-year target for full funding was still under consideration.

Since 1997, the unfunded liability has dropped from more than $8 billion to under $3 billion, raising the prospect that it could disappear altogether within two or three years.