Hefty ACC levy hikes locked in, as Government unveils review to contain rapidly rising costs

Minister for ACC Matt Doocey says his ACC review will focus on claims management. Photo / Samuel Rillstone

Accident Compensation Corporation (ACC) levies are set to rise steadily over each of the next three years, as the state injury insurer’s costs soar.

The Government has decided to broadly adopt the levy increases ACC recommended in September, after its books plunged $7.2 billion into deficit in the year to June, from a $911 million surplus in 2022/23.

Both the earners’ and business levies will increase by up to 5% a year, for three years, from April 1.

“For somebody on the median fulltime wage of about $70,000 a year, this equates to an additional $42 for the 25/26 financial year, or 80c a week, and an increase of $140 in three years’ time from this year’s levy rate,” Minister for ACC Matt Doocey said.

Motor vehicle levies will rise by more, with the average levy increasing by 7.8% from July 1 to $123 per vehicle, then a further 7.4% in each of the following two years.

Motorcyclists will be hit particularly hard. They will have to cover 37% of the injury costs they and their passengers sustain – a lift from the 28% share they currently pay for.

This will see the levy for a 500cc motorbike rise by $23 next year, to $321, then rise by another $121 the following year, and $91 in 2027/28.

Levies payable by electric car owners will also more than double to $109 next year – more than twice as much as the $49 petrol car owners will be charged.

The differential accounts for the fact electric vehicle owners don’t need to buy petrol, which is taxed by ACC.

Doocey also announced he would get an independent review done of ACC, because it’s taking claimants increasingly longer to get rehabilitated.

ACC noted the cost of providing services and compensation to injured people increased by 16% in the year to June.

The average claimant who received weekly compensation for less than a year took nearly 70 days to return to work in mid-2023. By mid-2024, this number had risen to 73 days.

Doocey said the review would have a particular focus on claims management.

“It will look at whether ACC has the right interventions and settings in place to support accident claimants to return to independence as quickly as possible,” he said.

“Alongside the review, I am working with the ACC board and the Ministry of Business, Innovation and Employment to strengthen performance monitoring and achieve more targeted and cost-effective social rehabilitation services.”

ACC will be in the spotlight when Treasury releases the Government’s Half-Year Economic and Fiscal Update on Tuesday.

The insurer’s deficit has to date been weighing heavily on the Government’s books, dragging them further into the red.

The situation has been exacerbated by a court ruling related to sexual assault victims possibly increasing the number of people eligible for ACC cover by 100,000.

Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.