NZ Shearing Contractors' AGM, Palmerston North

  • Deborah Morris
Associate Accident Rehabilitation and Compensation Insurance

Good morning ladies and gentlemen.

Thank you for inviting me to address your Annual General Meeting. I would especially like to thank Patricia Rangi and Peter Lyon for giving me the opportunity to speak with you.

We all know that ACC has an important role to play in the economy. It is also a central plank in the Government?s delivery of social policy.

In recent years there have been some important developments in both ACC policy and service delivery. So, I?d like to speak to you today about where ACC has been, where it?s going and what that might mean for you.

Since 1992 the Government has made important changes to ACC. This has included the move towards a premium structure based on industry risk rating. This has meant that premiums more closely reflect the accident record of the industries paying them.

We have also seen the development of targeted rehabilitation assistance through case management, and successful injury prevention initiatives that have resulted in ACC working closely with industry groups.

There can be no denying that in recent times farmers, and the agricultural sector in general, have been through significant economic hardship. Shearers are no exception.

I know you are concerned about the premium rates paid by shearing contractors and we will have the opportunity later to talk about this issue in some detail.

The Coalition Government announced late last year that it intended to introduce an element of competition to the way the ACC scheme was delivered.

The decision to open the employers? account to competition, announced in the budget, fulfilled that commitment.

To recap: employers and self employed people currently paying for ACC coverage will be able to shop around for their accident insurer from 1 July 1999.

We are not changing the 24 hour no fault coverage of the scheme, or the scheme?s entitlements. We are improving the way the scheme is delivered.

Employers have been seeking this change for some time, saying that they and insurers are the best people to manage the risk of work related injuries.

The Government agrees, and has decided that the benefits to employers and their employees outweigh any costs such as insurers? marketing and the cost of regulating the competitive environment.

Injuries are a huge cost to society and the economy. Providing employers and the self employed with a choice of accident insurer will create strong incentives for injury prevention and rehabilitation. Firms with good accident records will have this more strongly reflected in lower premiums.

Contractors such as yourselves, and farmers, will benefit from the flexibility to arrange insurance packages that suit your particular needs, and those of your workers. Self employed people, including shearers and farmers, will be able to buy one insurance product that covers both injuries at work and out of work.

People injured at work can expect from competing insurers at least the level of assistance they currently receive from ACC. The changes will also provide incentives to give injured workers faster access to rehabilitation and medical services, resulting in a quicker return to productive work.

We are confident that our proposals will deliver results. Since 1995 ACC has been operating a limited form of competition by allowing selected large employers to manage their employees? work injury claims for up to 12 months.

Recently we announced an expansion of this programme to allow more employers to enter the scheme through ?clubbing? together. We have also extended the 12 month injury management period to 2 years.

This accredited employer programme has shown positive results. There has been a significant decrease in the cost and duration of injuries in accredited employers? workplaces.

We have been encouraged by the Corporation?s recent performance, especially its focus on rehabilitation. This has lead to the fall in the number of long term claimants. The Corporation has also been successful in bringing its administration costs under control.

ACC?s improved performance, however, should not be seen in isolation from the reality of competition that it now faces.

We believe that introducing real competition to the employers? scheme will ensure that the Corporation?s performance continually improves.

The Government decided against opening the other ACC schemes to competition at this stage. We decided that opening up the employer?s account - over half of the current scheme - would adequately occupy the time of Ministers and officials over the coming year or two.

It is important to get this work right before even considering changes to the other Accounts.

Experience gained from operation of the new market will dictate our approach to further elements of competition.

This is, after all, the biggest change to the scheme?s delivery in its 24 years of existence.

The Corporation will manage claims incurred prior to the start of the new market. It will also continue to manage the motor vehicle, earners? and non-earners? schemes. It will also compete for employer and self employed business.

As I have already stated, the changes will come into effect on 1 July 1999. A programme of further work must be completed during the next few months.

The work includes:

Restructuring the existing ACC Corporation to ensure it is able to fairly compete in the new market;
Establishing the regulatory functions required to oversee operation of the market;
Updating systems in affected government agencies such as IRD; and last but by no means least
Addressing the estimated $5 billion ?tail? of existing claims liability in the employer?s account.
This liability has an impact on premium setting and deserves some explanation: the risk of injury and the firm?s injury record is taken into account when setting premiums.

However, existing claims account for a massive 85% of each year?s premium. For example a worker may have been injured 20 years ago, in a workplace that shut down 10 years ago, and is still on ACC?s books. The ongoing cost of compensating this injured worker is met by today?s employers. To pay for these costs ACC would need to have around $5 billion in the bank today.

We have to make a decision on how this ?tail? is funded. The changes that we?re introducing mean premiums will cover not only this year?s costs of an injury but also any future costs for longer term serious injuries.

My colleague, Murray McCully, and I will be regularly updating employer and employee representatives, the insurance industry, health providers and other key stakeholders throughout the development of the new market.

A Bill incorporating the changes will be introduced to Parliament later this year. Members of the public will have the opportunity to comment on the proposed changes when the Bill is being considered in the appropriate Select Committee.

We will be driving home the message that by July next year all employers and the self employed must have chosen an insurer, either with the ACC Corporation or elsewhere, and have proof of that insurance.

I would like now to talk to you briefly about injury prevention in your industry.

The NZ Shearing Contractors Organisation and Wools of NZ have been actively involved with ACC?s Injury Prevention division. I see a direct link between effective and targeted injury prevention programmes and reduced accident rates.

Prevention however, is only part of the process. It is important that employees and employers alike are effectively trained and focused on reducing injury costs.

This includes targeted prevention programmes, good personal fitness and wellbeing, safe working practices and an environment which encourages personal safety.

The most common injury type (accounting for 10% of all new claims in 1997, and half of ACC?s weekly compensation bill) is back strain and sprains, an everyday reality for many shearers. It is crucial that both organisations continue to focus on reducing preventable injuries.

Through eliminating bad practices and dangerous equipment from the woolshed and through paying attention to fitness and good health, we can get on top of the industry?s injury problem. There is no reason why shearers should have to face undue injury risk.

Can I congratulate you on the work you have done with ACC to date, and encourage you to continue your focus in this area. By working co-operatively and sharing information, I?m sure we will continue to see good progress.

Thank you again for allowing me to speak today. If there are any questions we will be happy to respond.