Private workplace insurance praised

By RICHARD BRADDELL

WELLINGTON - New Zealand's experience under privatised workers' compensation has been too good to ignore, says United States workplace insurance expert Greg Krohm.

"Grant you, the privatised scheme has been in existence for less [than] a year so it is premature to say it has been successful across the board," he said.

"But the numbers to date are unusually positive."

Many New Zealand companies have reported sharply lower premiums under the scheme introduced by the previous Government, while the crown insurer, @Work, yesterday reported return-to- work times were half those it had budgeted.

Mr Krohm, the former regulator of Wisconsin's workplace insurance scheme, said that while the numbers were so good they called for scepticism, the trustee arrangements under which insurers had to have a sound actuarial basis for reserving against claims made it unlikely that there had been any "cooking the books" or loss leading.

The New Zealand experience was all the more impressive because transitions to new schemes usually involved additional costs that masked the improvement for a year or two. While conceding that public monopolies in British Columbia and other parts of Canada were now working well after difficult periods in the past, Mr Krohm admitted a bias towards private provision, in part based on Wisconsin's experience.

Wisconsin had operated a competitive market since 1911, and there had been no call for restructuring.

The problem with public systems was that they were not under the same fiscal discipline in terms of funding and pricing.

"Most Canadian provinces are still digging their way out of past deficits," Mr Krohm said.

Another problem was that performance incentives and the urge to innovate, take risks and control costs was more muted in a public system.

But before the public versus private debate was embarked on, Mr Krohm said it was vital that clear rules were set by the Government, otherwise the scheme would fail, no matter who provided it.

Performance indicators were also essential. These could include comparisons of injury rates with other countries, time taken to settle claims and the time taken to get injured workers back on the job.

Also getting more attention was the quality of medical care.

The system should also be conscious of counter incentives such as inappropriate economic rewards that encouraged people to stay out of work.