ACC introduces experience rating today

1 April 2011

Today ACC has launched a new way of charging businesses levies that will more fairly reflect their safety record and claims history.

As of today (1 April 2011) ACC will implement experience rating. This is a system which recognises and rewards those business owners with good claims experience. It also encourages businesses to improve their workplace safety, which will make them better places to work.

Under experience rating, a company’s Work levy will be adjusted to more fairly reflect the company’s own safety record, not just that of the industry as a whole. Historically, a business’s Work levy was based solely on injury rates within its industry. This meant employers paid the same Work levy as others in the same industry, despite differences in their safety records.

ACC General Manager Insurance and Prevention Services, Dr Keith McLea, says experience rating is a fairer way to work out the levies that businesses pay to cover injuries to their employees.

“Work levies are important because they fund the cost of treatment and rehabilitation for people who get hurt at work. It makes sense that businesses with fewer injuries, and those which help injured employees get back to work, are rewarded for their efforts. Experience rating is similar to how your insurance company recognises your claims history on your car insurance policy”.

In addition to introducing experience rating, this year ACC has also increased the number of levy risk groups. Levy risk groups are how ACC groups businesses and self-employed people to set their base levy rate.
“These changes will enable us to more accurately and fairly group businesses with similar levels of risk, and reduce businesses cross-subsidising each other within an industry. For some businesses, this may result in an increase or decrease in the base levy rate. Experience rating will then be considered on top of this, so businesses with a good claims experience will still have that recognised,” said Dr McLea.

Experience rating will be applied in one of two ways, depending on the amount a business pays in ACC Work levies annually.

For larger businesses paying ACC levies of $10,000 or more, their Work levies will now be calculated to take into account:
• the number of claims made by employees for work-related injuries (with medical costs of $500 or more) over the three-year experience period;
• the length of time employees receive weekly compensation; and
• any fatal injury claim.

This information is then compared with other employers in similar industries, with similar injury risk, known as ‘levy risk groups’. If an employer’s performance is better than their peers, then their Work levy may be lower. However, if the performance is not as good, the Work levy may be higher. Levies can increase or decrease by up to 50 percent.

Smaller businesses with levies of less than $10,000, that meet the eligibility criteria, will receive a no-claims discount of 10 percent provided they’ve had no weekly compensation or fatal injury claims over the previous three years. There is no change for businesses generating between one and 70 weekly compensation days paid; however, a loading of 10 percent will be applied for businesses that generated more than 70 weekly compensation days paid or any fatal injury claim.

Dr McLea said businesses can work towards lowering their future levies straight away.

“Experience rating starts on 1 April, so what you do right now matters. If you can improve workplace safety now, and reduce your claims, it will have a direct impact on the levies you pay later,” he said.

Most businesses will receive invoices for levies calculated under the new system later this year.
The aim of the experience rating and no-claims discount programmes is to encourage businesses to put a greater emphasis on injury prevention and injury management in the workplace.
“Experience rating is all about getting people safely back to work after an accidental work injury and encouraging better workplace safety. That’s good for employers, it’s good for ACC, and most importantly of all, it’s good for the employees,” said Dr McLea.

ENDS

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