• Murray McCully
Accident Insurance

The Government today released further details of the framework it will put in place to ensure a stable market for workers compensation once the ACC Employers' Scheme is opened to competition from 1 July next year.

ARCI Minister Murray McCully and Associate ARCI Minister Deborah Morris said rules were being developed to ensure the scheme continued to cover all employees, and to ensure any disputes were resolved quickly, fairly and inexpensively.

It was announced in the 1998 Budget that employers and the self employed would be able to shop around for work related injury cover from 1 July 1999. Self employed people would also be able to shop around for cover for their non-work related injuries.

The ARCI Ministers confirmed today that a regulatory authority would be set up to play a key role in making sure that employees were covered, and that the market was stable.

They said the Government expected to introduce legislation in September to create the regulatory environment allowing insurers to develop an innovative and flourishing market that meets the needs of employers and the self employed.

The regulatory authority will check that insurers meet the prescribed entry requirements before they can write workplace insurance cover. The authority will also have the power to suspend an insurer if it is not satisfied that the insurer continues to meet the requirements. These entry requirements are designed to minimise the likelihood of insurer insolvency.

One of the central conditions of entry is that each insurer must appoint a trustee to safeguard the interests of claimants.

"If an insurer were to become insolvent, employees would still be covered, the Ministers said. "Costs would be met by employers and other insurers, through their contribution into a fund to cover claimants of defaulting insurers. The regulatory authority would be responsible for making sure claimants received their entitlements."

The Ministers said that employers would be given the option of providing cover themselves for employees' injuries (i.e. self insure). But unless they met the same requirement as an insurance company wanting to enter the workers' compensation market, they would be required to have the back up of cover with an insurer.

"We expect that some employers will want to self-insure," the Ministers said. "But they will be required to make sure that any internal insurance arrangement they establish meets the same regulatory requirements as a competitive insurer. The incentives to focus on safety and rehabilitation will remain very strong as much for these employers as for others," the ARCI Ministers said.

"The regulatory authority will be backed by a tough but fair compliance regime," the Ministers said. "Insurers who break the rules will be subject to fines of up to $50,000 for serious breaches. Employers who deliberately do not cover their employees for work related injuries will be hit with a penalty of five times the premium they should have paid. Self employed who knowingly fail to insure themselves will also be faced with a penalty of five times the unpaid premium.

"Employees will still be covered even if their employer fails to buy cover. Penalties and fines will be paid into a non-compliers' fund which, with a top up levy on insurers, will meet the costs of any work related injuries that should have been covered.

"Insurers will not be allowed to dodge paying out on a contract for work related injuries even if the employer or self employed person lied or failed to tell the insurer something that would have an impact on their premium.

"This ensures that employees are covered even if their employer has misled the insurance company.

"However, to balance that, insurers will be able to seek damages from the employer or self employed if this happens," Mr McCully and Ms Morris said.

Disputes Resolution
"We anticipate there may be some disputes as the new market gets established," the Ministers said. "It's important that those disputes are resolved quickly and fairly, that the process is not expensive for the parties involved, and that people receive entitlements and access to rehabilitation in a timely manner.

"Insurers competing in the ACC Employers' Scheme market will be required to appoint independent Review Officers to hear disputes between claimants, insurers and employers. There will also continue to be recourse to the Courts if people are not satisfied with the outcome of those independent reviews. This is similar to the review process currently operating with ARCI Corporation."

If the situation arose that insurers had a dispute over who should pay for a subsequent work injury covered by the legislation, the insurer with the current contract would have to pay the costs of the claim and manage it, and then seek costs from any other insurers. Claimants will not miss out on, or have delayed access to, treatment and rehabilitation, the Ministers said.

"For these claims where liability for a claim may be spread across different insurers, claimants will not have to bear any of that cost while the dispute is being settled," said the ARCI Ministers.

"The decisions announced today are part of the outcome of the extensive work programme that has been underway to determine the detail surrounding the introduction of competition to the ACC Employers' Scheme. Other details will be announced over the next fortnight," they said.


Questions and Answers
What happens to me if my employer doesn't pay the insurance premiums and I'm injured at work?

You will still be covered - the insurer will have to pay the claim and then chase the employer for the premiums.

What if my employer's insurer goes bust or decides not to offer workers compensation any more?

You will still be covered in either case. If the insurer becomes insolvent, there'll be a fund paid for by other insurers and your employer that will cover the cost of any work related injury you may have. If the insurer decides to exit the market, the regulatory authority will make sure that there are proper arrangements to transfer cover to another insurer. Either way, you will receive at least the entitlements set out in ACC legislation.

I'm a builder so I'm self employed - what if the insurer I've chosen becomes insolvent or decides to get out of the injury compensation business?

You will still be covered in either case. If your insurer goes bust, you will have to purchase a new insurance policy to cover future accidents. You will also be required to contribute an amount limited to up to a year's premium. As with any of your business partnerships, it will pay to check your insurance company carefully.

If your insurer decides they don't want to be in the injury compensation business any more and you are a long term claimant (for example an accident on your site means months of compensation and rehabilitation and in that time your insurer decides to leave the market), they will have to sell or transfer the cover to another insurer so you will continue to be covered.

My employer lied to his insurance company about the work that we do and the risks that our jobs entail. I'm worried that if I have an injury the insurance company won't cover me.

The insurance company is not allowed to renege on its contract because your employer doesn't disclose everything they should. The insurer would still cover you and then seek reimbursement and damages from the employer.

How will I know if my employer has insurance?

Employers will be required to provide you with information about their insurer and the cover they have purchased.

I developed a bad back at my last job, and when I applied for another job recently the boss there wanted to know if I'd ever been on ACC for a work injury. Can the boss do that and what will it mean for my chances of getting another job?

The current ACC Act covers this issue and similar provisions will be included in the new legislation currently being drafted. In summary, an employer can ask if its relevant to the job you are applying for; they may also need to make special provision to help you do the work or to prevent your injury flaring up again.

The information you provide can not be used by an employer to discriminate against you in breach of the Human Rights Act. At the same time, if your employer asks and you respond with a lie, you risk missing out on your entitlements if your injury does flare up again.