The New Zealand government has initiated an independent review of the Accident Compensation Corporation (ACC) to address growing concerns over rising costs and declining rehabilitation rates.
Minister for ACC Matt Doocey announced the review, emphasising its focus on claims management and operational improvements.
“ACC provides critical support to New Zealanders in times of need, but I am concerned that ACC’s performance has been declining for a decade,” he said.
He noted that rehabilitation rates have been falling, weekly compensation costs are increasing, and the average cost of claims continue to rise.
To manage increasing expenses, the government has approved annual increases of up to 5% for the earners’ and business levy over the next three years.
For workers earning a median annual income of $70,000, this adjustment will add $42 to their levy in the 2025/26 financial year, reaching an increase of $140 by the end of the period. Vehicle owners will also face similar annual levy increases, including adjustments for inflation.
The review will evaluate whether ACC’s existing systems and practices adequately support claimants in regaining independence.
It will include an assessment of intervention strategies and operational settings, with the Ministry of Business, Innovation and Employment (MBIE) and the ACC board collaborating on enhancing performance monitoring and rehabilitation services.
“My priority is getting Kiwis rehabilitated and back to work and independence quickly,” Doocey said.
The review announcement follows the release of ACC’s 2023/24 annual report, which highlighted significant financial pressures.
ACC reported a $7.2 billion deficit, attributed largely to an $8.7 billion rise in its outstanding claims liability (OCL). The OCL, which represents the estimated lifetime cost of all active claims, now stands at $60.2 billion.
Despite these challenges, ACC has maintained that it is financially capable of meeting current obligations. The corporation’s investment fund, designed to offset long-term claims costs, grew to $51.6 billion during the year, achieving a 7.6% return before costs.
ACC chief executive Megan Main noted that longer recovery times and a rise in claims involving time off work have become critical challenges for the scheme. To address these issues, ACC has launched a three-year strategy aimed at improving rehabilitation outcomes.
Key measures include:
“I’m confident the work in place will have a positive impact, and we’re already starting to see signs of improvement in our short-term client recovery rates,” Main said.
