Labour a bit shaky on ACC tightrope

By Richard Braddell

Between the lines


Implemented in haste, there was good reason to expect last year's privatisation of workplace accident insurance to fall flat on its face, if only because new insurers would fail to cope with the administrative nightmare of such a tight privatisation timetable.

As it happens, they did rather well and the privatised market now gives every indication of justifying former ACC Minister Murray McCully's act of faith that costs for employers would fall and private sector incentives would reduce injury rates.

The new government is now asking us to go along with another act of faith - that a reversion to ACC's monopoly will be even better. That was challenged in an Institute of Economic Research study for the Insurance Council.

That report was in turn rejected by ACC minister Michael Cullen who attacked alleged inaccuracies and false assumptions driving its conclusions, as well as language showing its bias.

Maybe. But the study is a rare occasion in the ACC debate where a comprehensive attempt has been made to argue the case, rather than just treating assumptions as self-evident truths.

Indeed, the NZIER could be forgiven for getting its assumptions wrong since it is difficult to say with certainty what the reinstated state monopoly will look like. Much will remain unknown until a second reform act goes before parliament mid-year.

Meanwhile, the Government has failed to state what mischief it intends to rectify. One problem with the existing scheme, Dr Cullen said, was that people were now seeking to reclassify workplace injuries as non-work, presumably because of niggly insurers. He also feared a rise in claimant litigation as insurers sought to control costs.

But Labour's ideas seem to be in a state of flux, particularly on key issues such as how the "new ACC" will be funded.

Its election policy was to go for partial funding, with a five year reserve that would cover the bulk of accidents. But if Dr Cullen had little time for the NZIER report, he said it at least helped firm up his private view that full funding should be the goal.

ACC, itself, is pushing for that. The attraction, as the NZIER modelling suggests, may be that lower premiums can be sustained because full funding provides a larger pool of money earning investment returns.

Labour's election policy is also at odds with ACC's and the private market's direction in another key area: it calls for a return to industry-wide classifications rather than premiums on each company's safety record. Yet, even ACC and the private insurers are in agreement that making individual employers feel the pain of their excessive accident rates through higher premiums reduces injuries.

That conflict alone suggests that Labour's policy as it stands would reinstate the bad old days when no fault meant no responsibility at all.