TOWARDS ACC REFORM - WORKING TO THE FUTURE OF ACC IN NEW ZEALAND

LAKESIDE CONVENTION CENTRE

THANK YOU FOR INVITING ME TODAY TO ADDRESS THIS EMPLOYERS AND MANUFACTURERS ASSOCIATION SEMINAR.

I KNOW THAT ACC IS A TOPIC THAT EACH OF YOU WILL HAVE AN INTEREST IN.

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.

THIS IS MY SECOND SPEECH AND MY FIRST PUBLIC ADDRESS SINCE MY APPOINTMENT TO THE ACC PORTFOLIO IN DECEMBER.

MY FIRST WAS LAST NIGHT TO THE New Zealand INSURANCE COUNCIL'S AGM WITH MY COLLEAGUE DEBORAH MORRIS, THE ASSOCIATE ACC MINISTER.

By the very nature of the political environment in which we will OPERATE IN, 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.

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 the investigation of 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 for 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.

This is not to say we can not do even better.

and that is no reason to avoid subjecting acc to the disciplines of competition.

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.

AND IF WE CAN IMPROVE THE DELIVERY OF ACC SERVICES THE GAINS FOR NEW ZEALAND WILL BE SUBSTANTIAL.

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.

It is at the very heart of my own political philosophy that competition between providers and choice for consumers are highly desirable qualities.

And were i the minister introducing ACC for the first time, then I am certain that those features would be crucial to it.

But my colleague and I are not introducing a new scheme this year.

AND THIS IS NOT 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.

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.

IN SCOPING THE OPPORTUNITY TO INTRODUCE COMPETITION, 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 REHABILITATION OF 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 would 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 ALL OF THIS LIES AHEAD OF US OVER THE COMING WEEKS, WE HAVE ALREADY MADE SOME 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.

FINALLY, I TURN TO THE TIMETABLE.

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.

I WISH TO EMPHASISE THAT THERE WILL CONTINUE TO BE A COMPREHENSIVE GOVERNMENT MANDATED ACC SCHEME THAT WILL REQUIRE ALL EMPLOYERS TO PURCHASE OR PROVIDE, ACCIDENT COMPENSATION INSURANCE FOR THEIR WORKERS.

COMPETITION WILL ONLY BE INTRODUCED IF THE GOVERNMENT IS SATISFIED THAT THERE WILL BE OVERALL ADVANTAGES.

THESE ADVANTAGES INCLUDE IMPROVED EMPLOYER RESPONSIBILITY AND SHARPER INCENTIVES FOR PREVENTION AND REHABILITATION.

THESE WILL RESULT IN LOWER COSTS FOR EMPLOYERS IN THE LONG RUN, BUT WILL REQUIRE GREATER INVOLVEMENT BY EMPLOYERS IN THE REHABILITATION OF THEIR WORKERS.

CONSULTATION WITH THE EMPLOYERS FEDERATION AND THE MANUFACTURERS FEDERATION PROVED TO BE VALUABLE TO THE POLICY DEVELOPMENT PROCESS THUS FAR, AND I LOOK FORWARD TO CONTINUING CONSULTATION WITH BOTH YOUR REPRESENTATIVES AND YOURSELVES.

ONCE AGAIN THANK YOU FOR GIVING ME THE OPPORTUNITY TO ADDRESS YOU TODAY.

I HOPE I HAVE GIVEN YOU AN ASSURANCE THAT THE GOVERNMENT IS SERIOUS ABOUT THIS ISSUE, THAT WE HAVE LISTENED TO YOUR CONCERNS, AND THAT WE WILL CONTINUE TO DO SO.

THE TIMETABLE AHEAD IS TIGHT.

I THANK YOU FOR YOUR CO-OPERATION TO DATE AND LOOK FORWARD TO WORKING WITH YOU ON THIS CHALLENGING AND VERY IMPORTANT PROGRAMME.