• Murray McCully
Accident Insurance

The Government has today confirmed that employers will continue to pay a levy to meet the costs of existing claims in the ACC Employers' Account.

Mr McCully said that employers were already paying this surcharge as a result of last year's decision to fully fund this Account.

"It is sensible that employers remain responsible for these costs so that they remain focused on rehabilitating workers injured in the past.

"I am confident that we can make the transition to a competitive environment next year, with employers meeting the full cost of their unfunded liability, and with no increase in the current average premium, " he said.

"In other words I believe employers can expect that the cost of the surcharge and their new premium combined will be on average about $2.35 for every $100 of wages paid.

"However I believe there is substantial scope to reduce that unfunded liability very quickly, provided we allow employers to participate fully in the process.

"Employers will be involved in how the "tail" of past claims is managed," the Minister said. "Experience has shown involving employers actively in managing claims and rewarding those who succeed in helping injured employees back to work helps reduce the liability over time."

The ACC Employers' Account has an outstanding claims debt of nearly $5 billion before taking into account the Corporation's reserves. This is the amount that ACC would have to invest in the bank today to continue looking after existing claimants for the next 30 to 40 years.

As the Budget and the subsequent economic outlook have made clear, the liability for existing claims would be recognised on the Crown's accounts irrespective of opening the Employers' Account to competition, said Mr McCully.

The liability has accumulated because ACC has previously been funded on a "pay-as-you-go" basis with enough premium collected each year to pay the cost of claims during that particular year. Past and current generations of employers have not paid the full future costs of their injured employees.

"When the market opens, employers will pay a fully funded, risk rated, premium to an insurer of their choice, and a variable levy set by regulation will be collected through IRD over 15 years to pay for the existing claims," Mr McCully said. "If employers and ACC focus on helping these claimants back to work, both costs and the pay back time will reduce more quickly.

"Further work on the exact size of the levy will be worked through during the next few months," he said. "The Government has decided that the amount of levy will depend on an industry's individual risk and experience."