ACC Levies Demand Caution

Media release
August 30

ACC Levies Demand Caution

Business NZ is urging caution over proposed ACC levy rates for next year.

Draft Levies for 2008/2009, announced today, would see employers paying an average levy of $1.25 per $100 of earnings.

Business NZ had the opportunity to be involved in the levy setting process this year as a member of ACC’s levy setting steering committee.

While grateful for the invitation, Business NZ economist John Pask says he is disappointed the organisation’s concerns about the levy-setting process have, to date, not been accepted by the ACC Board.

“We disagree with some of the fundamental assumptions behind how the premiums are set, because they continue to distort the real costs of the ACC scheme to business.

Business NZ’s key concerns include:

* Over-funding of the work account by $800 million.

* The Corporation’s low discount rate, given its high investment returns, with no tax payable on interest received.

* The 11.2% risk margin – illogical for a state monopoly insurer.

Using a low discount rate and funding an unnecessarily large risk margin can only result in excessive reserves and increasingly over-funded accounts, says Mr Pask.

“Attempting to smooth average levy rates long-term sends false signals to earners and businesses as to the ACC scheme’s real running costs and the impacts of any changed policy decisions.”

Business NZ would support an independent assessment of the assumptions the levies are based on, taking account of the fact that ACC is a state monopoly insurer and not subject to normal commercial disciplines many other insurers face.

Mr Pask says this would help instil employer confidence in the long-term viability of the scheme.

ENDS

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