Judith Collins: Drop in ACC levies could inject $300m

When the ACC scheme was introduced in the 1970s, New Zealanders gave away their right to sue for personal injury. Photo / File

ACC levies are a big cost to business. Levies pay for a form of insurance; safeguarding businesses against major financial loss should an accident occur.

Earlier this year, the Government signalled that a drop in ACC levies for all New Zealanders is sustainable. We're anticipating individuals and businesses will have around $300 million extra in their pockets in 2014/15, increasing to around $1 billion in 2015/16.

Prior to 1974, before ACC levies were introduced, individuals and businesses operating in New Zealand faced significant risk. The cost of insurance and the costs associated with being sued were high on the list of worries for every business owner.

A person's right to sue may have been worthless if they couldn't afford to take legal action - likewise if the costs outweighed the likely award of damages or if the guilty party was not worth suing.

When the ACC scheme was introduced in the 1970s, New Zealanders gave away their right to sue for personal injury and were instead compensated without needing to prove that someone else was at fault and should pay.

Businesses often complain about the burden and costs of levies, but they must remember that the alternative, a combination of insurance and litigation risk, is a lot more frightening.

My sights are set on ensuring that ACC is delivered more effectively and efficiently for those that need it, so levies can continue to drop. It's important levies don't jump around so that businesses can properly include them in their budgets.

I'm sure business owners will agree that accidents are an avoidable cost - they are expensive disruptions that go to the heart of the morale of an organisation.

One of ACC's primary roles is to prevent accidents occurring in the first place. Focusing on prevention, rather than the cure, will help to reduce the physical, psychological and emotional pain accidents can cause an individual, their family, employer and community. Prevention is also an effective way to drive down levies.

Levies should be more sensitive to the accident record of the business and incentives should be aligned with the outcomes that we all want.

ACC is one of New Zealand's largest financial institutions. Beyond the corporation's role as an insurer, ACC has a critical role to play in our economy.

The scheme is funded by levies paid by road users, businesses, the self-employed and employees. The non-earner's account is funded by the government. A number of issues feed into the costs of ACC and therefore they directly affect the levies.

Some of these costs are controlled by ACC and some are external; some of the costs are immediate and direct; and some relate to claims that may be payable over more than 80 years.

The longer a person is off work due to an accident the less likely they are to ever return to work. This not only creates a significant issue for the injured person, but also for their employer. We know that if a person is still off work after nine months, the chance of them returning to work within a year is less than 32 per cent.

Let's be clear - work is not a punishment. Work is a fundamental part of our identity as Kiwis, and essential to the New Zealand way of life. ACC is committed to getting people back to work where they are able.

Over the past year, ACC has focused on regaining the trust of New Zealanders and on improving its service for claimants. At the end of February, ACC's investment returns were $1.1 billion ahead of budget.

The potential for levy reductions in 2014/15 would inject around $300 million into the economy for businesses and families. Final decisions on levies will be made later this year, following public consultation.

Judith Collins is ACC Minister.