The process of rolling out and winding up ACC

Next week's changes signal the beginning of the end for ACC. ANDREW LAXON examines its troubled history.

ACC has been under attack almost since it started 25 years ago. The comprehensive no-fault accident compensation scheme launched by Labour in 1974 was the most generous in the world.

But as costs soared, successive National governments have clamped down on payments and conditions.

In the process ACC, which began as an expansion of New Zealand's cradle-to-grave welfare state, has been turned into an insurance scheme, which is now almost ripe for full privatisation.

Key dates in the rise and fall of ACC are:

Pre-1967: New Zealanders who suffered injuries could sue for damages against the person or organisation responsible. There was also a workers' compensation scheme and compulsory third-party motor vehicle accident insurance.

1967: A Royal Commission of Inquiry on workers' compensation, chaired by Justice (later Sir Owen) Woodhouse, recommended a comprehensive, no-fault accident compensation scheme, replacing the right to sue. The Woodhouse Commission said few injured people were able to take legal action, which was too costly and time-consuming.

But the commission went further. It recommended that all motor vehicle injuries should be funded by a premium on owners and drivers and that all injuries to wage and salary earners - whether the accidents occurred at work or not - should be funded by a flat-rate premium on employers.

1974: ACC was introduced by the Labour Government. It provided compensation for all personal accidents, regardless of who was at fault and where the accident occurred - at work, at home, on the road or on the sports field. The scheme also included lump sum compensation payments, which were not recommended by the Woodhouse Commission.

1979: The Government reviewed the scheme, following concerns about rising costs and employers' complaints that they were subsidising the cost of non-work claims. The review was headed by former National minister Derek Quigley, now Act's spokesman on ACC.

1982: As a result of the Quigley review, the National Government stopped funding ACC for the cost of future compensation claims from that year's accidents (known as a "fully-funded" system). Instead, it paid only enough to cover the claims from that year ("pay-as-you-go"). The change was reversed 15 years later. Other changes allowed ACC to refuse compensation to anyone injured while committing a crime and cut back the compensation payable by employers in the first week from 100 per cent to 80 per cent.

1992: Former ACC Minister Bill Birch attempted the biggest crackdown yet on ACC's rising costs. He abolished lump sum compensation and made workers start paying for their accidents outside work through a new premium on employees. ACC became an insurance-based scheme with much tighter rules on eligibility for compensation. However many of the new rules were so rigid and unfair that the Government was forced to relax them four years later.

1996: As ACC levies jumped 20 per cent, the Government tried to tighten up the scheme again. It introduced work testing for accident victims, including amputees and invalids. Claimants who were found fit for work had three months to find a job before losing their compensation payments. ACC was also allowed to buy operations directly from hospitals, enabling it to get some sick people back to work faster.

1997: Former ACC Minister Jenny Shipley increased the workers levy by 70 per cent - a $175 annual increase for someone on the average wage - to make ACC fully funded for the cost of future claims again. The change allowed the Government to introduce competition, by putting ACC on the same financial footing as private insurance companies.

1998: The Government announced that compensation for workplace accidents would be opened up to competition from July 1 1999. Employers would be able to shop around for a private insurer of their choice but the insurers would have to meet minimum standards of cover set by the Government. Labour promised to scrap the changes if elected.

May 20, 1999: Car registration fees jumped by $50 in the Budget. The increase made the ACC Motor Vehicle Account fully funded, enabling the Government to open this account to competition too. This would see private insurers competing with ACC to cover personal injuries in road accidents.

July 1, 1999: Competition in workplace accident insurance begins. Five private insurers will compete with ACC's successor, Government-owned @Work Insurance.