8 Mar 2009

ACC scheme one of world's most effective, says lawyer

4:20 pm on 8 March 2009

A lawyer who deals in accident compensation cases says the ACC scheme has been shown to be among the most effective in the world.

The Government has warned the Accident Compensation scheme will have to become less generous, as it moves to contain costs.

The average New Zealand household could end up paying an extra $2400 a year in ACC levies by 2014, under forecasts released by ACC Minister Nick Smith on Wednesday.

Dr Smith says costs rose by 12% a year under the previous Labour Government - from $1.4 billion in 2000 to $3.2 billion now. Liabilities have jumped more than $2.5 billion to $22 billion in the past six months.

He says such increases are not acceptable to the Government. Significant change is required at ACC and New Zealanders will either have to pay more, or entitlements will have to be contained.

Wellington lawyer John Miller says a review by accounting firm PricewaterhouseCoopers found the ACC scheme and its administration costs were lower than comparable schemes overseas, while offering benefits that were equal or better.

Mr Miller says the Government's concerns are strange, given that insurance costs for house, car and costs are increasing at a faster rate than the increases forcast for ACC.

He says ACC spends about 10% of its budget on operating and legal fees - a fraction of the litigation costs in Australia and the United States.

The Government is reviewing a number of entitlements and changes introduced by the previous government, including free physiotherapy and cover for mental injury suffered from workplace trauma.

It also signalled there will be changes on the board of ACC to bring in more financial expertise.

The Labour Party says changing the ACC scheme would be an unnecessary over-reaction that could force people into taking out private insurance. It says the Government is talking up a disaster in ACC where one does not exist, so it will find it easier to press ahead with reforms down the track.