Could $50b ACC investment fund be better managed? Minister Andrew Bayly commissions review

The Government is running the ruler over the way the Accident Compensation Corporation manages its $50 billion investment portfolio.

The newly appointed minister responsible for the state injury insurer, Andrew Bayly, has commissioned consultants at Willis Towers Watson to review the performance of the Accident Compensation Corporation’s (ACC) investments, its governance, and the approach it takes to managing its investments.

Bayly assured he wouldn’t tell ACC how to invest – it was responsible for figuring out how much risk to take on, for example.

But he wanted to ensure there were no “constraints”, possibly around reducing exposure to high carbon-emitting industries, restricting ACC’s ability to maximise its returns.

ACC reported a return of 7.26% in the year to June. On average, it’s delivered a return of 9.26% per annum since 1992, a rate above its benchmark of 8.02%.

The external investment review, which is the first of its kind, will complement an already announced review of ACC’s operations, including its claims management processes, which will be led by Finity Consulting.

“Over the last 10 years, ACC’s performance has steadily decreased,” Bayly said.

“Costs are up, with levies struggling to keep up. Meanwhile, rehabilitation rates are down, slowing down people’s return to independence following an accident.

“Clearly if this trend is left unabated, the viability of the scheme is at risk, saddling future generations with immense costs. A robust plan is required to improve ACC’s long-term financial sustainability without having to make large increases to levies.”

In December, the Government announced three years of hefty hikes to the levies that businesses, employees and motorists pay to help fund ACC.

Higher levies are aimed at helping plug the $7.2b deficit ACC reported in the year to June.

ACC’s deficit has become a political problem, as it’s made it materially harder for the Government to get its books back to surplus.

Late last year, Finance Minister Nicola Willis instructed Treasury to include a new measure of the Government’s surplus/deficit (“OBEGALx”) in its accounts that excludes the impact of ACC.

The cost of ACC providing services and compensation to injured people increased by 16% in the year to June.

The average claimant who received weekly compensation for less than a year took nearly 70 days to return to work in mid-2023. By mid-2024, this number had risen to 73 days.

Bayly said ACC faced challenges on multiple fronts and he believed action was required to “ensure its sustainability and longevity”.

He expected to receive progress reports on the two reviews by April, with final reports expected by June.

The reviews won’t consider the scope of what ACC covers.

Court rulings that have expanded ACC’s coverage have been another big driver of its increased claims liability.

For example, a court ruling, which could see an additional 100,000 people who were abused as children become eligible for compensation, pushed ACC’s outstanding claims liability up by nearly $3.6b to $60.2b by the end of June.