Newspaper Publishers Association Annual Conference

  • Murray McCully
Accident Insurance

Quality Hotel, Te Rapa, Hamilton

good morning ladies and gentlemen.

thank you for inviting me today to address the annual conference of the newspaper publishers association of new zealand.

this opportunity comes early in our work programme and while I am able to paint a broad picture of our position, the great majority of issues of detail will be dealt with by ministers over the coming months.

both parties in the coalition government have a strong interest in improving the acc scheme.

i, and my colleague deborah morris the associate acc minister, have been charged with overseeing this task.

by the very nature of the political environment in which we will operate, I believe that a strong working relationship will be pivotal.

i have heard a number of interesting theories about how I got this job, and none of those theories involve my having asked for it. it may surprise some when I say that I am pleased to have it.

the opportunity, after 24 years of operating, to significantly improve the acc scheme, is one of the most challenging political assignments to be handed to a minister of the crown during this term, and I welcome it.

let me give you some facts that will give you a sense of acc's scale in the economy:

in 1996/97 acc expenditure was approximately 1.74% of gdp.
acc cost $1.6 billion dollars in 1997.
individual employers pay acc premiums that range from 1% to 9% of payroll.
the current average employer premium is $2.61 per $100 of liable earnings. this is set to fall to $2.35.
these are significant figures in anybody's language. if we can improve the delivery of acc services the gains for new zealand will be substantial.

most of you will be familiar with the announcements made by my predecessor, now the prime minister. in december last year mrs shipley announced that the government agreed, in principle, to introduce an element of competition to acc. the government also agreed that there would be no full scale privatisation.

a two staged work programme was announced: the first stage expanded the accredited employers programme and flagged improvements both to acc cover for self employed people and acc's administration. the second stage involved investigating the costs and benefits of introducing competition to particular acc services. this is where I picked up the ball.

before proceeding to talk about the big picture can I make two points.

first, the government is 100% committed to the concept of 24 hour no fault coverage that the scheme has provided for injured new zealanders for the past 24 years. I do not believe it is in anyone's interest to return to a system dominated by lengthy, messy and very costly legal battles. despite my proud ownership of a law degree, I have no desire to advocate a system where the only guaranteed winners are the lawyers. there are plenty of those already.

second, I don't intend to dwell on the past performance of the acc scheme or the acc corporation, but I do want to say that we currently have an excellent board and a new chief executive that are beginning to deliver the sorts of results that the corporation's many stakeholders have been demanding for far too long. that is not to say we can not do even better. and that is no reason to avoid subjecting acc to the disciplines of competition.

today I do not intend to treat you to a lengthy technical analysis of the acc issues which will be before the government this year. my guess is that the question in the minds of those interested in acc when I was appointed was 'where is this guy coming from'? and I thought that I might answer that question for you today.

the big issue to be considered by my colleagues and I this year is not whether competition in the provision of acc services would be a good thing. the concepts of competition between providers, and choice for consumers are at the very heart of my own political philosophy.

even the nations of eastern europe have come to terms with the fact that state monopolies just do not have the necessary incentives to deliver the best service at the best price, all the time.

i would have thought that the benefits of competition were fairly evident to any new zealander who has had his or her eyes open over the past decade.

i well remember in my first years as an mp that one of my more significant constituency duties was writing letters pleading all manner of colourful medical, age, family and security reasons why my constituents should be provided with a telephone by the state monopoly which was allegedly in the business of providing them. and I have not the slightest doubt that were it not for competition, we would still be eating stale biscuits and climbing down stairs in the thunderstorms rather than using airbridges, on our domestic airlines.

so, were I the minister introducing acc for the first time, then I am certain that competition would be a central feature of it. but my colleagues and I are not introducing a new scheme this year, and this is not just an exercise in political philosophy. the millions of new zealanders who depend upon the acc scheme and the businesses whose viability is affected by it will not thank the government and they will not thank me, if we create an environment of uncertainty in relation to the quality of acc services or the cost of those services.

so the question is not just whether competition is a desirable feature, but whether, we can identify clear benefits from its introduction in relation to acc, and equally important whether we can be confident about managing the transition.

we need to be clear that there will be benefits from the introduction of various levels of potential competition. we need to be assured that a competitive environment will improve pricing signals, reduce cross subsidisation, and improve service quality. the government is looking for a win / win situation where the benefits will accrue to premium payers, claimants and society overall. improved price signals should reward those who control their risks. competition should encourage a greater injury prevention effort and encourage employers to become more involved in rehabilitating their injured workers.

but even more important than evaluating the benefits of competition, we need to see our way clearly through any transitional arrangements. it is my perception that the public's tolerance of lengthy reform agendas, dozens of new acronyms, and rolling mauls of bureaucratic process, is fairly significantly diminished. and so is mine.

there are important and highly complex questions which we need to be able to answer as we confront the introduction of some degree of competition. there are major interface issues with health, welfare and the ird. we need to understand the type of regulatory environment which is needed including prudential requirements, default provisions, review and appeal provisions, and transferability provisions.

we would need to place the acc on a proper commercial footing, which would require significant changes. and we would need to make some decisions about the ownership of the $8.3 billion in outstanding claims liabilities.

last year, we made an in principle decision to collect premiums on a fully funded basis, and protected our capacity to do so in the setting of this year's premiums.

while the government will be addressing each of these transitional issues in the coming weeks, we have already made progress:

it has only been since 1992 that acc has moved towards operating under insurance principles, although there is still some way to go.

the introduction of initiatives such as experience rating and risk pooling have made the relationship between an employer's claims record and premium much more explicit.

some of the legislative changes made in 1996 that are currently being implemented will have positive impacts on the scheme. better vocational rehabilitation initiatives and the work capacity assessment procedure will assist in reducing the long term claims tail; and, speedier access to elective surgery and more flexibilty will have a similar impact in reducing people's dependence on the scheme.

the government is set to consider proposals for the introduction of competition to acc in late april 1998. decisions will be announced in the 1998 budget. depending on the outcome of these decisions, legislation will be introduced in 1998. I anticipate that the earliest possible introduction of competition is april 1999.

since you have been good enough to give me this opportunity, there is another brief message which I would like to leave with this gathhering. the end of this century and the arrival of the new millennium provide an opportunity to pause, to reflect on where we are as a country, and where we need to go. I am one who believes that new zealanders have, over the past 15 years, achieved a very great deal. there are many reasons why we should be able to enter the next century a more confident, generous and positive society. Sadly, I believe that opportunity is in danger of being squandered as we seek to submerge our achievements and successes beneath a sea of negativity. One of your members, to celebrate the Christmas period, decided to have a "good news day" in which the particular newspaper printed positive stories on the front page. I commend the initiative. But what about the other 364 days?

In case any of you are convinced that I am attempting to shame you into more favourable coverage of politicians can I assure you that I long ago abandoned any such fanciful notions. But I am inviting you to reconsider the "if it's not negative, it's not news" dictum which drives so much editorial decision making.

Last month I was in Christchurch to meet with the 40 leading players in the tourism industry, to review the problems from some Asian markets. Afterwards a journalist from a national radio news service approached one of the operators. First, she asked how the meeting with the Minister had gone. When told it had been a good meeting, her disappointment was obvious. "How badly has your business been affected?" she asked the tourism executive. "We are down in some markets, but overall we are doing OK", he replied. "Well could you possibly introduce me to someone whose business is being badly affected" was her response. She certainly wasn't going to let the facts divert her! And, if I might be so bold, that has not been an isolated instance.

The owner of the coach business which has unwisely become totally dependent upon korean business is a news story. The dozens of talented and professional entrepreneurs who develop new markets create new jobs and earn this country's way in the world, are deemed not to be 'news'. We are, as a country, too slow to salute our achievers, to celebrate our successes. We too easily fall prey to those who would turn this country into the land of the long black cloud.

Now I am not trying to lay the responsibility for all of this at the feet of the news media. But I do hope you will accept that you do have the ability to make a profound difference to New Zealanders attitudes. Day after day, you make the decision whether to tell the public that the vessel is half empty, or half full.

I believe that New Zealanders genuinely want to be a nation of winners. I believe that New Zealanders know that this is about the best country in the world to live in, that we have done pretty well over the last decade and a half, and that we are capable of doing really well as we move into the next century. But that will not happen unless we create a culture of success, a culture which recognises achievement and performance.

I am the first to accept that those of us who are privileged to serve in the house of representatives, have a significant part to play. But I would not want to let this opportunity pass without drawing attention in, I hope, a constructive way to the responsibility which is yours.