Privatization of ACC – of course it is ideological
Speech by Helen Kelly President NZCTU to Conferenz “Reviewing NZs Accident Compensation System”
SPEECH GIVEN: 18 May 2011
It always amuses me that when the union movement opposes the privatization of ACC we are dismissed as simply being ideological – will it might pay for me to declare right at the outset – yes that is completely correct. Our opposition is ideological but it is not ideological blindness– it is ideology based on experience and facts. And please don’t give me a hard time about using the word privatization vs competition. The Government intends to move services currently provided by the State into the private sector – this is privatization of services – no amount of spin will change that.
We believe in state services.
We believe that when it comes to social security the best way to ensure high quality, easily accessible, equitable and flexible forms of social security are through the power of the state.
One of the best examples of this is the success of ACC.
ACC is a system unique to New Zealand.
While lots of countries have publicly provided social security systems – public education, health, welfare, pensions etc – and while others do have state run workers compensation scheme, no others have a scheme as extensive and as comprehensive as our ACC – so ACC provides a perfect example to test the validity of our ideology. State provision vs privatization.
Before I start to do that, I need to make a couple of other points.
I don’t believe the Governments agenda to privatize the ACC is ideological.
I don’t believe it is driven by a belief for example, in the power of the market to deliver efficient services, or by any concern that Government is a poor provider of public services.
I believe it is driven by a lack of care and respect for people less well off then many of them and many of the people they mix with and who fund their political futures.
I also believe it is based on an incredible deference to business and employers that is misplaced and is not afforded to workers.
This may sound controversial, but in the absence of any other reasonable explanation and in light of other Government initiatives, it is a reasonable conclusion to reach.
And I can say this rather boldly because we have seen this Government build new parts of the State to deliver services they want delivered–
- CERA to rebuild Christchurch,
- the national health board to co-ordinate health services,
- recent announcements on support for increasing irrigation systems to farms are examples,
and they have used the state to bail out or to subsidise business –
- funding to Warners for the Hobbit,
- the bail outs, beyond requirements and guarantees, of Canterbury Finance and AMI (I am sure for those of you in the insurance industry in the room, this bail out in particular was of great comfort!)
- These talk against any ideological opposition to the state.
Each of these examples is either using the State to support private business – or using the state to co-ordinate services in the most efficient way.
If the privatization of ACC were ideology – these policies would not have been implemented.
So what drives our ideology? The facts for one thing and the belief that societies should work together to look after each other particularly at times of adversity such as after an accident.
The State is capable of delivering great services at very effective prices. And we have other examples alongside ACC.
NZ has some of the best schools in the world. Ninety eight percent of our kids go to state schools (from what I can tell the other 2% must be almost all the children of Government MPs – despite this huge public preference for state education, I haven’t found one yet that has a kid in a state school – I could be wrong).
- We are able through this public school system, for example, to share the costs of education and to do things like weight funding in favour of schools which poorer kids attend – this would not happen in a market –
- every school in New Zealand can employ the best teacher they can attract – teachers are centrally paid, paid on a standard scale and a school of very poor kids can appoint teachers at the top of that scale if they choose to.
It is not a perfect system but if you want to look to Australia or to the USA which have massive enrolments in private schools- the public school results are very variable (Australia) and shockingly bad (USA).
Equity, access and social security are seriously undermined for many. The economy of these countries will also suffer long terms with huge groups of adults leaving un educated and not meeting their full potential.
Health is another example – have a look at the new maternity unit at Wellington Hospital – family rooms, wired for internet, fantastic services – every baby in Wellington has the opportunity to be born there – parental income matters for nothing – I like the idea that the poorest baby and the wealthiest share these great facilities and we take it as a given.
So why ACC?
ACC is another fine example of a co-operative endeavor to deliver an essential social security provision.
Those injured at work, at play, at home and in between the three and those that injure are protected by the scheme.
Those injured access rehabilitation and compensation.
Those who injure are protected from litigation.
The costs of the injuries caused are socialized within the whole community. This in turn allows us to participate in activities such as sports and work etc without huge financial risk or cost.
Kids who fall off the bars at school are protected. Schools that put the bars up can’t be sued.
Drivers that are hurt in car accidents are protected, drivers that cause the accidents can’t be sued.
And those that injure themselves, or are injured in natural disasters are also covered – they have no one to sue but are just as much in need of rehabilitation and compensation – drivers that crash their cars, elderly that fall, tradesmen that fall off ladders, people hurt in earthquakes are all covered.
And all of this in what the Price Waterhouse Coopers extensive report into the scheme said was one of the most administratively efficient systems in the world, one of the most cost effective and one of the most comprehensive – if ideology is not the driver what on earth except a lack of caring, would make you dismantle that?
Now I am not saying the scheme is perfect – it’s a hard road finding the perfect scheme! And it has become even less perfect in the last two years, but it has proven it can work and it can be improved.
We are concerned with many of the recent changes – they are aimed at undermining the scheme for three reasons:
- To drive costs down to make the cost of insurance look reasonable in the first transition
- To undermine public confidence in the ACC to make privatization more politically palatable.
- To introduce pricing signals so that those interested in offering insurance can see which areas are profitable and what the range of costs might be that need to built into any insurance proposals.
We are not only involved in a battle to stop ACC being privatized but also to protect the scheme from changes that make it unfair and that discredit it.
What do we expect to see if ACC is privatized?
We would expect – reduced coverage – the Government is unlikely to demand the full, 24 hours, no blame, all NZ type of cover we have now.
Cover will be split into accounts and disputes will arise about work vs home accidents – political pressure will make ACC the easiest target for resolution of these disputes and costs will be shifted from insurance companies to the State.
Claims will be contested much more strongly and workers will be left fighting a collaborative effort by their employer and their employers insurer to avoid coverage of an accident. International private schemes have an average of 19-24 month delays for legal resolution of claims. Lawyers also make lots of money out of disputes.
Doctors will face endless delays in treatment payments and I think it is interesting that in order to streamline the processes for Doctors they are proposing setting up a “common desk” to handle doctors expense claims – an admission that state infrastructure is needed to deal with the inefficiency of multiple insurers and a solution that will not resolve the disputes about who actually pays the bills.
ACC will pick up the losses of companies that go under leaving behind injured workers – already do for the AEP – Feltex.
Full rehabilitation will suffer – workers will be dismissed and removed from cover rather than returned to being fit enough to work
Innovations such as ACCs Better @ Work won’t work with multiple insurers and this type of innovation will be lost
Initiatives such as those exercised after the Christchurch earthquake will not be possible. For those of you that missed it, Government agreed ACC would cover all first week lost wage claims rather than dispute whether accidents happened at work or not. I understand the Minister acknowledged the power of the ACC response to the earthquake in his speech today – how ironic!
Increasing insurance costs will lead to pressure by business on Government to reduce entitlements further, dismantale disputes processes and allow more and more parts of ACC to be shifted to the private sector.
And is this just speculation?
No – we have seen this already – both in the current scheme through the Accredited Employer Scheme and also when ACC was privatized previously. International experience of workers injured at work under private insurance schemes is also grim.
Karen will talk to you next about the AEP scheme but the Government is looking to expand it to smaller employers – what are the two areas they are suggesting dropping in order for his to happen – the requirement for solvency – that you must show you can meet the costs short and long term of self insurance – and the requirements for safety audits – you must show you are capable of running a safe workplace. So to be an AEP employer – you might not have to even show business competency and strong knowledge of health and safety systems, but you can run your own compensation and rehab scheme!
So we have a lot of reasons to oppose this privatization and there are very few reasons to support it.
Some of the reasons given to support it don’t stack up on the evidence – for example:
Some employers believe premiums will decline – this depends on what insurance is required to cover and on how much underwriting the Government is prepared to take on.
As Price Waterhouse Cooper showed – ACC is one of the most cost effective schemes it reviewed and so any savings will be either paid by other employers in increased premiums, shifted to the State or based on reduced entitlements.
Employers will have a choice of insurer – but hang on a second – they are insuring their workers – the ones that will be injured – workers have no choice and will effectively see the risk of any particular insurer being a poor performer, shifted to them. Insurers may drive down premiums to compete – as AMI did for house insurance – leaving the state (or the worker) with the problem
Privatization could lead to new products being developed offering better cover than ACC – that can happen now – fill your boots.
Employers will have incentives to reduce accidents and workplace safety will improve.
Really – they don’t have an incentive now? This is a real contradiction in policy – at the same time as we see incredible deference to business – they suddenly are being accused of not doing all they can to keep workers safe because there are no incentives in ACC? We are not prepared to rely on the market as a mechanism for workplace health and safety.
The research suggests that workplace health and safety is achieved by decent standards of employment, security of employment, inspection and enforcement, and decent standards of health and safety including requirements for good systems, trained staff and union involvement. Deregulated systems with market incentives and the right to sue have let workers down around the world.
There is no evidence in countries with private systems that where regulation does not insist on safety standards and systems, financial incentives are a satisfactory replacement or that work is any safer.
We all know that despite what might be considered good market reasons not to, business has shown a huge propensity to take financial risks in lots of areas and financial penalty has proved a poor incentive for many things including health and safety –
New Zealand must improve its health and safety performance and if we are going to use financial incentive as our main initiative in this area and in the process remove a brilliant rehab and compensation scheme that steps in during failure – we would want to see the evidence that the incentive model works. I am afraid the emporer is increasingly looking naked when it comes to proposals that rely on the market to safe guard very much at all that society values and relies on.
And if money does truly talk - increased fines and penalties for accidents would presumably have the same effect yet the DOl preference to be a “modern regulator” and not use the full powers of the Health and safety act suggest it and its Minister believe that financial incentives/penalties are not all the crack up to be.
And we actually have a model now we can use as a proxy for privatization – AEP – Karen will talk more about this shortly but we believe it goes a long way to proving our point – there is no research to showed these workplaces are any safer because of the system they use, and statistics about other elements such as return to work rates and employee satisfaction are hugely variable.
It is not clear if overall the savings are significant except for where claims are contained or because of state underwriting, and of course we have seen some of the more dangerous industries continue with ACC cover – e.g. Pike River. Socialising the losses they call that!
So the CTU is completely opposed to the privatization of ACC and will continue to oppose it.
We don’t think it is in the interests of New Zealanders – employees or employers – and can only think that it is in the interests of insurers only.
We have seen a poor performing insurance industry recently – both during the height of the GFC, AMI here and everyday in Queensland as more and more citizens find they are being denied flood payouts for damaged property.
We have a great scheme - a scheme built up and owned by New Zealanders now and for the future and we want to see in continue.