Executive summary

The following table summarises: ACC’s current 2010/11 levy rates; ACC’s recommended levy rates; the Department’s advice on levy rates; and my recommendations on levy rates for 2011/12, which is that no increases are necessary.  All rates in this paper are GST exclusive unless specified.

	Work Account Average levy per $100 of liable earnings	Earners’ Account Levy per $100 of liable earnings (GST inclusive)	Motor Vehicle Account Average levy per vehicle
Current 2010/11 Rate / DoL recommended rate	$1.47	$2.04	$334.52
Consultation and ACC recommended rate for 2011/12	$1.47	$2.18	$342.96
My recommended rate	$1.47	$2.04	$334.52

The levy rates I have recommended still cover all of ACC’s costs for claims in the upcoming year.  The effect of not increasing levy rates for the 2011/12 year is that ACC will not be on target to reach the 105% funding level the Board would like to achieve, albeit that with current levy rates ACC is still expecting a $1 billion surplus.

My key reasons for leaving ACC rates at the current level are that:

• increases in ACC levies would put further strain on households, businesses and motorists at a time when the recovery from the recession appears quite fragile
• ACC has made significant improvements in its performance over the last two years and, in my view, is on the right path to achieve sustainability.  However, ACC needs to understand that simply passing on costs is not acceptable and pressure needs to remain on ACC to control its costs.

This paper also addresses ACC’s recommendations to me on a number of changes to levies policies that I agree with:

1. changes to classification units within the Work Account levy risk groups and capping the effects on levies of those changes
2. creating a new classification unit in the Work Account
3. increasing the maximum and minimum liable earnings and
4. increasing the maximum liable earnings for the Workplace Safety Discount Programme,

and a number that I do not agree with:

5. not charging administration costs on the residual portion of levies
6. reclassifying goods service vehicles and
7. changing the proportion of Motor Vehicle Account levy paid on motor spirit levy as opposed to on the licence fee levy.

The introduction of experience rating to the ACC Work Account is also proposed. I am recommending introduction of:

1. a no-claims discount programme for small employers
2. an experience rating programme for larger employers and
3. business grouping rules and transfer rules.

The introduction of experience rating will improve the sustainability of the Scheme and improve incentives on employers to reduce the number and effects of injuries in the workplace.  Experience rating will help achieve this by:

1. strengthening financial incentives to prevent injuries
2. encouraging appropriate return-to-work programmes and
3. making levies fairer for businesses by reducing cross-subsidies between low-risk and high-risk employers.

If levy rates or other settings are to be changed from the prior year and experience rating is to be introduced, these must be set in regulation by 31 March 2011 for the Work Account and the Earners’ Account.  The Inland Revenue Department’s processes require decisions on any changes to the Earners’ Account by 10 December 2010.

Download the full report [pdf 23 pages, 1,207 kB] and appendix [pdf 14 pages, 735kB]