ACC to tighten claims process, reduce growth of people on long-term compensation

The ACC's claims costs are expected to rise to $8.8 billion in 2025/26, as its books are forecast to remain in the red. Photo / Angus Dreaver

The Accident Compensation Corporation is planning to be more scrupulous when paying claims, as the Government pressures it to run a tighter ship.

The state insurer has committed to “highly ambitious” targets around getting injured people rehabilitated and back to work more quickly.

It aims to halve the annual growth rate of the pool of people it supports for more than a year (via weekly compensation) from 13% in 2023/24 to 6.6% in 2025/26, and to 3.8% the following year.

This will require better injury prevention and improved rehabilitation.

The Accident Compensation Corporation (ACC) wants the expected lifetime costs of new accidents to start falling. In 2023/24, these costs rose by 12.5%.

With the ACC registering more than two million claims in 2023/24, it is also aiming to slow its claims growth, so this stops surpassing population growth.

The insurer made these commitments, among many others, in its annual Service Agreement with the Government, published this week.

The ACC suggested there were people receiving support through the scheme who were not entitled to it, recognising that the Government wanted entitlements to “only be funded in line with the Accident Compensation Act”.

It also noted the Government wanted it to consider strengthening the sanctions it issues those who break the rules, and use all the levers at its disposal to “incentivise clients to participate in their recovery”.

“A significant organisational transformation is likely required – one that includes changes to our claims management approach and operating model, consistent application of scheme boundaries, improvements in the capability and capacity of our workforce, and increases in the use of enabling technology,” the ACC said.

“We recognise the urgency and are already seizing the opportunities to improve performance.

“We recognise this activity has to be scaled and accelerated. A key part of delivering this scale of change will require the use of operational levers and perhaps also require policy, legislation and funding levers.”

The ACC foresaw the changes eroding public trust and confidence in the scheme.

In the coming months, ACC Minister Scott Simpson is expected to unveil his “turnaround plan” for the organisation, which might help inform how the ACC achieves its targets.

Simpson’s plan will be influenced by external reviews of the ACC’s operations, culture and investments he is in the process of receiving reports on.

The Herald understands Simpson’s initial focus will be on trying to get the ACC to sharpen its operations.

Longer-term, he is interested in exploring whether the ACC’s scope should be narrowed. This could potentially see ACC claimants moved to other government agencies, such as the Ministry of Social Development.

The ACC is not receiving enough revenue to cover its claims costs, which it expects will rise to $8.8 billion in 2025/26.

It does, however, expect its net deficit to narrow from $7.2b in 2023/24 to $1.9b in 2024/25 and $2.9b in 2025/26.

As for levies, the Government late last year decided these would be lifted steadily over each of the next three years.

It said that both the earners’ and business levies would rise by up to 5% a year, for three years, from April 1 this year.

Meanwhile the average motor vehicle levy would go up by 7.8% from July 1.

Both the ACC and the Government say they want levies to remain affordable.

Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.