ACC monopoly chips again at bottom line

As premiums rise, businesses are being asked to live with a system that treats customers as cash cows, says MICHAEL BARNETT.

The Government's renationalisation of accident insurance is not working.

That has become evident since news that about 70 per cent of New Zealand's 300,000 self-employed will be paying increased ACC premiums from April 1.

When the Government restored the state monopoly in the middle of last year it promised competitive premiums; that is, rates that would not exceed those that had been briefly offered by private insurers.

A comprehensive and positive accident prevention culture was expected to be phased in.

Instead, what business is being told to live with is typical of a monopoly that treats customers as cash cows to cover its higher-than-expected losses, and then adds to the burden by introducing a preventative regime underpinned by harsh penalties.

Premiums which were initially reduced are now on the increase - and there is no choice for the consumer.

Businesses must pay ACC's higher premiums because no other provider of accident insurance is permitted. And because ACC has no competition, there are no benchmarks to measure its performance against.

In a further return to the bad old days of monopolistic, uncaring Government, ACC is increasing premiums in an environment where the Government also intends to introduce an accident prevention and rehabilitation regime whose only sanction appears to be the threat of heavy penalties.

To my mind this is the cart before the horse. Surely, the smart thing would have been to pick up the intention of the previous model to design a positive accident-prevention programme and establish education courses supported by relationship managers to work with businesses - not against them - to phase in the new programmes over a given period.

After a period of grace, non-compliant businesses would have few excuses if they faced higher premiums as a result of accidents in their workplaces.

From the standpoint of seeking to work co-operatively and constructively with businesses, attempting to bring in a new accident regime on the back of higher premiums is not only ill-timed but is now too late.

Clearly, if the Government believed when it came to office that by renationalising accident insurance it could provide a better, more efficient and lower-cost service than the private sector, it must now be having second thoughts.

And if pragmatism is the objective, and the Government does not want to impose needless costs on the economy, then I say let's be pragmatic.

Let's make the tough call and do what needs to be done to put in place a workable and fair scheme that is capable of winning the confidence of business.

By putting up premiums and forcing self-employed businesses to conform to a harsh injury-prevention regime, the impression conveyed is that business is being levied to cover for the rising administration costs of ACC and not because there has been any significant increase in accidents.

ACC, it appears, is building up costs as its monopoly powers are widened, when it should be reducing costs as a result of improved safety regimes being implemented by its customers.

Finally, any increase in the cost of business at the hand of government is unwelcome, especially in a regime of low-inflation expectations.

The increased premiums may not force any businesses to close, but they become another chip at the bottom line that reinforces the view that the Government is winding back the clock to recreate a monopolistic, cost-plus anti-business state.

Unfortunately, ACC's performance is needlessly creating a point of constant irritation between business and the Government, when forging a strong and mutual business-Government partnership is required to build and encourage growth in our economy.

* Michael Barnett is chief executive of the Auckland Regional Chamber of Commerce and Industry.