The insurance industry has cautiously welcomed ACC Minister Nick Smith's proposals to allow employers to buy accident cover from private providers, while giving more firms the ability to manage the cost of injuries.
The proposed reforms are in a discussion paper released today. Opening work-injury cover to private insurers will force Accident Compensation to sharpen its game while a stock take of the so-called Accredited Employers Programme (AEP) showed companies in the scheme managed 12 per cent fewer claims and 15 per cent lower costs.
"This is a relatively small offering - an evolutionary process," said Chris Ryan, chief executive of the Insurance Council. "The key thing will be the cost of it."
The insurance industry could access a pool of capital to write such workplace-insurance cover though reinsurance costs have surged after a spate of natural disasters, he said.
Like the government's plans to sell down the Crown stake in state-owned energy companies and Air New Zealand, the ACC reforms would come after this year's elections, which would allow John Key's administration to claim a mandate for the work if it is returned to power, as expected.
"A mix of public and private provision of accident compensation is the most common model amongst developed countries," Smith says in his foreword to the discussion document entitled: 'Increasing choice in workplace accident compensation'.
"Choice will put continuous pressure on ACC to be customer-focussed, innovative and efficient," Smith said.
Currently only 136 major employers are signed up to the AEP. Smith's proposal would see that number increased starting from April 1, 2012. As well as loosening the rules, the government would offer more options for employers to share the risks of cover.
New Zealand's ACC scheme was started in 1974 as a 24-hour, no-fault cover for injury. The ACC collected $744 million in levies in the Work Account for 2009/2010 from more than 550,000 employers and self-employed people.
The cost of injuries to the New Zealand economy was assessed at $4.9 billion in 2004/2005, the discussion document says.