ACC would need $19 billion to meet solvency levels
It would cost ACC around $19 billion to meet the solvency levels required by commercial insurance companies, MPs were told yesterday.
ACC chairman John Judge told MPs considering the Insurance (Prudential Supervision) Bill that the state owned corporation would like to be covered by the bill, but there was "no way" it could meet the solvency provisions though it would like to do so in the long run.
The scheme's claim liability -- the future cost of existing claims -- is around $23 billion.
Current net assets, which ACC uses to cover future costs, is around $11b, leaving a gap of $12b.
A commercial insurer would be required to cover this and have another $7 billion as a risk contingency.
The bill lays out a supervisory regime for insurance companies to be overseen by the Reserve Bank.
Mr Judge said the discipline this would bring would be invaluable for ACC.
This would include six monthly reporting, strict criteria and obligations for directors and office holders, an independent actuary and a statutory risk management profile
Finance select committee chairman Craig Foss appeared to be sceptical about the idea, saying ACC did have many of those disciplines and there was nothing stopping it from imposing them even if they were not included in the new regime.
Other MPs wondered whether the insurance law might clash with ACC legislation.
Mr Foss said the committee would seek further advice on ACC's request to be partly covered by the law.
The Government recently pruned ACC coverage and treatment as well as hiking fees to meet the growing cost of claims and treatment.
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Comments
ACC "cheaper than Aus"
This is the real reason why repeated comparisons between Australia's and NZ's workplace compensation schemes continually show NZ's ACC to be "cheaper" (as some politicians are quick to point out when ACC fees are mentioned). In New Zealand, those currently receiving cover are quite happy to push out the responsibility for meeting the costs they incur onto future generations ('pay as you go" funding), whilst premium-payers in Australia are responsible for the liabilities they personally incur ("fully funding"). When the $19 billion shortfall is factored back into the NZ costs (i.e. comparing apples with apples rather than with the promise of an orchard to be planted some time in the future), there is clear evidence that the NZ scheme is not in fact "cheaper" for the services delivered. These facts need to be highlighted in any debate about prospective opening up of elements of ACC to competition.
Award
Hellen Clark deserves another degree from the learned professors at University- God save NZ!!!
ACC - Public or Private Institution
ACC was established as a public and not a private institution. As such it is Government funded and guaranteed at the taxpayers potential expense and is therefore quite different to private shareholder owned commercial insurance institutions. Surely, ACC's 'sovereign guarantee' is far superior to the solvency provisions of the Insurance (Prudential Supervision) Bill, so why are our MP's even discussing and negatively highlighting this issue. Perhaps there is a hidden agenda is reflected in the political scare-mongering nature of these tactics, as a preparation for floating ACC into the private sector? Get real John Key and company, your elected responsibility is to the taxpayer and there is no way they should pick up a $12B or $19B tab that would allow it to meet commercial risk criteria and make its sale commercially viable.
If ACC has been successfully run on lower solvency and higher risk criteria for the past forty years, let it continue. Over spending and inefficient management practices - now there is an issue that does need to be addressed as is the case for our entire overstaffed and overpaid civil service. By the way, how many staff are in the PM's department these days? I bet it is at least four times the 14 servants Rob Muldoon managed to run the country with.
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