Workplace insurance demands our study

By Richard Braddell

Between the lines


All six private insurers plunged into the workers' compensation market knowing that Labour would put them out of a job. They did so wilfully and with eyes wide shut so no further tears should be shed for them.

But that does not relieve industry, workers and all other stakeholders - in short, all of us - from making a critical examination of what has happened with ACC and where we go now.

To begin with, the previous government's mandate to open workplace accident insurance to private competition was flimsy. Few, other than larger employers and insurance companies eager for business, had any obvious appetite for privatisation, even if they were less than happy with ACC's record over the years.

Privatisation seemed to stem from an ideology that the private sector always knows and performs best. But there have been benefits: the $200 million in premium savings have to be worthwhile, even if they were to erode somewhat as market realities catch up with the aggressive discounting by new entrants seeking market share.

Also, private sector insurers have a strong self interest in ensuring that premium rates accurately reflect risk. That is important, because by getting premiums right, individual employers with bad accident records pay for them if they don't mend their ways.

That amounts to a giant leap in the direction of the original tenets of ACC that accident prevention is paramount, followed by rehabilitation and compensation. But for many years ACC had been less effective on the first two priorities and more effective on compensation.

To be fair, in the last two or three years ACC has made great progress in getting things right. And because it has done so, fewer people are being injured, those who do get back to work faster and compensation payments are falling. So much so there is a credible argument that were ACC still in the market, its workplace accident premiums would soon be as good as those offered by private sector.

Proponents of a state monopoly can also point to reputable studies from overseas that suggest that well run state schemes can be as good, if not better, than private insurers.

But, again, we run into the problem of ideology. Although centrist Finance Minister Michael Cullen will champion the legislation, the principles appear to have been developed in the left wing of the party in consultation with trade unions.

This time, employers and private sectors are being left out. Worse still, Labour seems intent to reverse the private market with even more of a rush than National's to set it up.

Labour's indecent haste will ensure that important voices from industry, and even private insurers, will get little chance to be heard. With so little buy-in, we risk the same horrors as superannuation all over again.