KEY POINTS:
There was little apparent craving for change in mid-1999 when a National government opened workplace accident insurance to private competition. Few, other than large employers and insurance companies keen for business, showed any great appetite for the initiative, even if many had gripes with ACC's record.
Almost a decade on, a similar scenario could soon be played out. Having watched Labour revert to an ACC monopoly immediately after claiming power, National is proposing not only to introduce competition to workplace cover but also to the motor vehicle account and the earners' account, which covers employees against non-workplace injuries.
National's policy is underpinned now, as then, by an ideological bent for market forces and minimum state involvement. Private insurers would be more flexible and more proactive in rehabilitating injuries. Because they were more efficient in pricing in poor accident records, they were expected to give employers a strong incentive to improve workplace safety and, therefore, reduce injury rates. In 1999, the Shipley Government also trumpeted a pay-off in lower costs for employers.
Much competition theory suggests these expectations were not unreasonable. So did the involvement of seven insurers, including the state's @Work. Unfortunately, the Labour Government's rush to reassert ACC made it difficult to establish the reality. There was not even time for a year's data from the private market, which might have provided a reliable guide to its merits.
What there was, however, suggested that the privatisation was providing rewards, despite the tight timetable imposed on the insurers. Something like an annual $200 million saving by employers in insurance costs was achieved, and claims of a sharp drop in workplace deaths and the number of workdays lost through injuries. Although the latter was based on incomplete data, the monetary benefit, especially to large employers, could not be disputed. Dick Hubbard, the "socially responsible" cereal-maker, claimed savings of $30,000 to $35,000 on the bill for his 120 employees.
Some claimed the private insurers had discounted aggressively to build positions, and this could not have been sustained. Once market share had been sorted out and claims poured in, initial savings would erode. Again, Labour's haste precluded a final conclusion. But one thing is certain: the initiative may have lacked widespread support when it was introduced, but many lamented its termination. A parliamentary select committee considering legislation that ended the private market received more than 1000 submissions. The vast majority backed the market, but were shrugged off by the Government.
There were undoubtedly unintended consequences of making businesses feel the pain of their excessive accident rates through higher premiums. Some employers encouraged employees to report workplace injuries as non-work, thereby shifting the cost to ACC, while others pressured doctors to pay all treatment costs to avoid insurance claims. Some doctors also lifted patient charges to compensate for increased red tape.
But such niggles did not detract from an overall indication that the private market was on its way to justifying the National government's act of faith. Not perhaps enough to say definitively that an unacceptably high workplace injury rate would be driven down, and that injured workers would make quicker and better recoveries. But enough to buttress National's ideological beliefs.
Now, once again, there may be no great clamour for change. Nor, however, does the brief history of competition in 1999-2000 suggest reasons for alarm. This would be especially the case if it were reintroduced with less haste and more care.
