Big bucks for Aussie insurers in ACC privatisation

• Marty G
• 15 years ago
• Categories: ACC, privatisation

It seems certain National will begin the privatisation of ACC starting with opening the work account to private competition. As happened in 1998, private insurers will cream off large and low-risk employers with loss-leading special deals to gain market share, leaving the taxpayer to shoulder the burden of the rest, and put up premiums later.

An intriguing report from Key’s old firm Merrill Lynch reveals that Australian insurance companies expect to make $200 million off this privatisation.

A prime source of these profits will be reduced pay-outs. As you know, that’s how private insurers make profits by avoiding paying out whenever possible. Insurers spend huge amounts on court cases trying to avoid paying out, which ties up the court system. In practice, that will mean Kiwis missing out on speedy treatment and income coverage, while Aussie insurers get rich.

Here’s what an independent report into ACC by Price Waterhouse Coopers has to say (they’ve removed the report from the ACC website, but it’s referenced here):

‘The ACC under its current implementation structure performs as well or better than most other schemes we can observe around the world.’

‘No fault’ models (such as ours) are associated with:

• More injured people (70-95%) receiving compensation;
• More money reaching people: A higher portion of total costs (up to 90% in some schemes) goes directly to claimants’ benefits compared to perhaps only 50% in liability systems;
• Getting results faster: No fault systems get payment happening more quickly than in tort systems. The average settlement completion in the US tort system is 15 to 20 months, whereas benefits flow in 3 weeks on average in an uncontested workers’ compensation claim, and 4 months in contested claims; and
• Outcomes for people are better. A New South Wales study (on a blended system) found those on the no-fault system better off in terms of health outcomes and return to work rates.

Only two groups stand to gain from National privatising ACC. Not businesses and workers insurers and lawyers.

[PS. I’ve shamelessly stolen some of the above from the excellent posts SP and Dancer did on ACC last year]