ACC Minister Nick Smith has confirmed the Government will move to allow private insurers to compete with the Accident Compensation Corporation for a share of New Zealand's work place insurance market.

Dr Smith said the "in principle" decision would enable employers to continue purchasing workplace insurance from the ACC or from a registered insurer.

"This policy of choice is the best way to put pressure on ACC to provide effective and efficient workplace accident cover," he said.

"This is a significant and complex reform that we will be advancing in a careful and considered way."

The decision was announced today following the Government's consideration of a "stocktake" of the scheme begun late last year.

Dr Smith said the decision varied from the advice provided by the stocktake that ACC exited the workplace insurance market altogether, leaving it solely to private companies.

He said that advice was "somewhat contradictory" as it was suggested ACC would have difficulty competing with private insurers but would at the same time be able to compete unfairly "as it does not have to provide a return on capital".

The Government would consult the public on the plan next year with work including measures to ensure ACC did not cross subsidise or compete unfairly with private insurers, and protections to ensure all workers continued to receive cover.

"Final decisions and legislation on introducing choice will occur after the 2011 election and will be subject to a mandate from the public."

Officials will now also investigate introducing "choice" or private sector competition in other ACC accounts such as the earners and motor vehicle accounts, Dr Smith said.

Insurance Council chief executive Chris Ryan said his organisation welcomed the announcement saying it was "a positive and constructive move" toward enhancing the safety of New Zealand workplaces.

Meanwhile, Dr Smith also said he had declined the ACC board's recommendation to lift ACC levies next year.

"We do not wish to add to the financial pressures on households and businesses while a fragile economic recovery is under way."

Furthermore the Government was encouraged by the "huge improvement" in the ACC's finances and wanted to "keep maximum pressure on the Corporation to improve its performance rather than just passing additional costs onto levy payers".

Dr Smith also confirmed "experience rating" would be introduced to the Work Account from next year which gives employers discounts and penalties of up to 50 per cent on their ACC levies depending on their history of workplace injuries.

Also, the Accredited Employers Programme (AEP), which allows employers to take responsibility for managing workplace injury claims is to be extended.

Dr Smith also said the ACC's Disputes Resolution Service would be granted greater independence to address concerns about the corporations "dual role as judge and jury". Work would be done around establishing the service as a separate entity next year.

Dr Smith said the steps announced today were "carefully timed and interconnected".

"ACC needs to move to experience rating and to provide risk sharing options like the AEP for it to be able to compete in a more open worplace insurance market."

Meanwhile the Engineering, Printing and Manufacturing Union (EPMU) said the changes were "unnecessary and unfair" and amounted to privatisation which would allow "a massive transfer of wealth from the government to private insurance companies".

Labour and the Greens also said the Government planned to privatise ACC.

"New Zealanders will end up paying more for ACC and get less coverage," said Labour's ACC spokesman David Parker.

"Prime minister John Key and his ACC Minister are trying to bury their privatisation plan in the Christmas rush, hoping New Zealanders won't notice - but they won't be fooled."

The Green's ACC spokesman, Kevin Hague, said support for vulnerable accident victims would be cut by the part-privatisation of ACC.

"In a cynical move the Government has chosen to make this announcement just before Christmas... this is dodgy and dishonest politics," Mr Hague said.

BusinessNZ welcomed the announcement.

"Competition will allow for more innovative products and services in this market with companies being able to negotiate arrangements that better meet their particular needs," said chief executive Phil O'Reilly.

ACT leader Rodney Hide, who had pressed for ACC to be opened to private competition, said the case was "overwhelming" and he was pleased to see progress was being made.

* See a Government provided Question and Answer document on the ACC changes here.

- With NZPA