Money: Doing the compo shuffle

A radical change is on the way for Accident Compensation. MARK FRYER explains what it means for employers, the self-employed, and the rest of us.

Twenty-five years on, it all seems so utopian. No longer would injured workers have to fight for compensation in the courts. Instead, injury victims would get a payout as of right, regardless of whose fault the accident was.

That was 1974 and this is now, and Accident Compensation is going through the biggest shakeup since it was established.

Instead of being provided by one state-owned organisation, compensation for work-related accidents will soon be offered by competing insurers. Employers and the self-employed will still have to pay for insurance - as they do now through ACC premiums - but for the first time they will be able to choose who they get that insurance from.

If you're in that category - even if you employ just one person ("private domestic employees" excluded) - time is tight; your shiny new competitive accident insurance policy has to be ready to go from July 1.

But employers and the self-employed aren't the only ones affected. From July, if you work for someone else you're no longer covered by the ACC for workplace accidents.

Making the change is a huge job. One consultant, Aon Consulting, estimates that somewhere between 160,000 and 500,000 policies may need to written by July 1.

And it may all be a waste of time, given that Labour has promised to get rid of the new system if it wins the election later this year.

In the meantime, here's what the changes mean, whether you're a worker, an employer or a one-man band.

EMPLOYEES

What do I have to do?

Nothing; the boss decides who to insure with and if you don't approve, too bad. However, your employer is legally obliged to provide you with a written statement spelling out who the insurer is, and other information such as how to make a claim and how disputes will be handled.

Do I still get the same cover?

Pretty much, according to the law, although the way that works out in practice remains to be seen. Employers can't save money by choosing a cut-rate policy with low benefits, because the minimum level of cover - such as the entitlement to 80 per cent of your pay while you're off work - is set out in the Accident Insurance Act, which governs the new competitive system. And there's nothing to stop your employer signing up with an insurer who offers something better than the minimum.

What if my employer doesn't buy cover, or the insurer goes bust?

It's an offence not to buy cover. More importantly, you'll still be covered by a special fund being set up to deal with uninsured workers. You'll also be covered if your employer's insurer becomes insolvent.

Can I use my own doctor?

Initially, yes. If you're injured you can seek help from any qualified person. However, you may need a certificate from a doctor before you get compensation, and your employer or the insurer is entitled to decide who that doctor is.

What if I disagree with the insurer's decision?

You'll have three months to dispute it, and all insurers have to designate someone to review disputed claims. You're entitled to a hearing, and then a decision in 28 days. The Act says the reviewers must act in an independent manner, however they will be paid by the insurer. If you don't like the reviewer's decision, you can appeal to the District Court, and possibly further if you have the stamina and the budget.

What about accidents away from work?

Same as now; you're covered by the ACC. The changes affect only accidents at work. Motor vehicle accidents will also continue to be covered by ACC (except some work-related ones).

Does this mean ACC premiums won't get deducted from my wages any more?

No such luck. Those premiums pay for accidents outside the workplace, which ACC will still cover. Similarly, part of your car registration and petrol tax will continue to pay for motor vehicle accidents.

EMPLOYERS

Why all this stuff about July 1?

That's the date by which your insurance contract covering your staff against workplace accidents must come into effect. You can get an insurer to cover all accident costs, or you can agree to carry part of the cost yourself - like accepting an excess on your home and contents policy, in exchange for a lower premium.

Six insurers are registered to offer workers compensation insurance, including one - @Work Insurance - which is Government-owned.

Can't I just stick with the ACC?

No. From July 1 the ACC no longer provides workplace accident insurance.

Hoping the whole issue will go away isn't a great idea; if you don't have an insurance contract signed by June 25, ready to come into effect on July 1, you'll automatically be allocated to @Work Insurance, on its terms. If you still don't insure you could face a penalty of anything up to five times the premium you would have paid.

How much do I have to pay?

That's up to you and your insurer. Under the new system, insurers can take an employer's safety record and work practices into account when they set premiums, which is meant to provide a financial incentive to make the workplace safer.

In setting their initial premiums, insurers are likely to be particularly interested in your claims history with ACC.

So I pay the premium and forget ACC forever?

Not so fast. Not only will you have pay your new insurer, possibly in advance, but ACC has far from finished with you.

For a start, all employers have to pay the usual premium for the three months from the end of March to the end of June, though they won't be billed for that until August.

Next, about 89 per cent of employers (those who started operations after March 31, 1980) will have to pay a full year's levy for the 12 months to the end of March this year. That bill should arrive late this year and, unless it's under $250, at least part of it will have to be paid by June 30 next year.

Finally, you'll be expected to make a contribution to the future cost of workplace accidents which have already happened. That "residual claims levy" will be collected by the IRD and is expected to go on for about 15 years.

What if I want to switch insurers?

You can, depending on the deal you've signed with your insurer. But first, you'll have to prove you've signed up with someone else, or that you're no longer required to provide workplace insurance.

SELF-EMPLOYED

Is it the same as it is for employers?

Not quite. Unlike everyone in this process, the self-employed have a choice - stick with the ACC or choose a new insurer for work accidents, and most of those outside work too (apart from motor vehicle accidents, which will still be covered by the ACC).

And no, going without insurance altogether is not an option. If you don't choose a commercial insurer you'll automatically stay with the ACC.

If you choose a commercial insurer, your insurance will have to include income replacement of at least 80 per cent of the minimum wage - $14,560 a year.

If you opt out of the ACC for work cover, you also have to opt out for non-work cover, meaning you have to buy one policy which covers both.

Insurers aren't obliged to give self-employed people a quote on an insurance policy, as they are for employers (but they will be from July 1, 2000).

Later, if you want to cancel your policy, you'll have to prove you've purchased cover elsewhere, or that you've told the ACC you want to go back to it, or that you are no longer trading as self-employed.

Is that all?

Far from it. Like other employers, you'll also have to pay an ACC premium for the last three months cover and, in most cases, a full year's premium for the 12 months before that, as well as keep contributing to the future cost of old accidents (see the section on employers, above).

What if I'm self-employed and also employ other people?

You have to take out cover for your employees with one of the new work insurance companies, regardless of whether you arrange cover for yourself or stick with the ACC.

But I've already got all sorts of insurance

Too bad. Even if you have your own disability or income protection insurance, you still have to take out accident compensation insurance as well.

For more information

Contact the Department of Labour on 0800 862 466, or visit its Web site: www.tochoose.govt.nz.

The six organisations registered to provide workplace accident insurance are:

* Fusion Insurance Services: 0800 800 807

* New Zealand Insurance: 0800 31 31 33

* HIH WorkAble: 0508 967 522

* MMI General Insurance: 0508 664 225

* Farmers' Mutual Accident Care: 0800 473 268

* @Work Insurance: 0800 63 63 63