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Media Release - 23 April 2010

Privatisation – bad for ACC, bad for small business, bad for New Zealanders

The privatisation of ACC will make it even harder for injured New Zealanders to receive fair compensation, said ACC Futures Coalition spokesperson Hazel Armstrong today. Private insurance provision of ACC cover will also make the scheme more expensive for most employers, especially small ones.

‘If private insurance is allowed in to ACC then we can expect to see a worsening of the current situation where genuine injuries are being refused compensation in a blind determination to reduce costs,” said Ms Armstrong.

“Has the private insurance model anywhere else in the world ever delivered better, cheaper outcomes than ACC? The answer is no. So why is the Government pursuing this goal? Why, when ACC already provides the fairest, best value, most efficient service, is it being dismantled? The role of ACC, and the Government as its custodian, is to best serve the people of New Zealand. This move will actively harm them and serve only the interests of private profit.”

“New Zealanders did not give up their right to sue in return for having their claim for compensation decided on the basis of an insurance company’s bottom line.”

The argument that competition between insurers will result in cheaper and more efficient administration is not borne out by the evidence. In the 1970s and 1980s when private insurers operated in New South Wales, Victoria and South Australia, an initial period of competitive premiums was followed by a sharp increase, especially for smaller firms, as insurers found themselves under-reserved in their provisioning for outstanding claims

The impact of marketing and distribution efforts and commissions or salaries to agents, as well as the duplication of financial, IT and administrative systems all make private provision less cost-effective than ACC’s existing monopoly.

“It is a myth that privatisation will make ACC cheaper for levy payers and more efficient to run,” continued Hazel Armstrong. “All but a few large employers will ultimately see levies rise, administration will become more complex, and levy payers will see more of their contributions disappear into the pockets of insurance company executives and shareholders.”

“The Government could also end up burdening itself with even greater liabilities because of the possibility that private insurers can go bust, as several recently have. In 2001 HIH (which offered underwriting services in New Zealand under the previous privatisation experiment) was put into receivership. HIH was also active in the workers compensation market in Australia. While another insurance company entered into negotiations to pick up the renewal rights in HIH’s workers’ compensation business, nonetheless, workers’ compensation policies written in Victoria, Western Australia, Tasmania and the ACT were the subject of government–funded rescue packages[1]. In other words the governments were forced to come to the rescue to protect vulnerable beneficiaries through the failure of the market model.”


[1] Kehl, David HIH Insurance Group Collapse: E-Brief, 29 November 2001

12:00AM Friday, 23 April, 2010

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