Experience rating for ACC
April 5th, 2011 at 12:00 pm by David FarrarBrian Fallow writes in the Herald:
ACC has reintroduced experience rating to the calculation of levies for employers and the self-employed.
ACC Minister Nick Smith says it will make ACC levies fairer and provide better incentives for business to improve workplace safety.
The Council of Trade Unions, Labour and the Greens argue that it will encourage employers to pressure workers to lie about whether an accident occurred in the workplace or somewhere else.
I really wonder why the professional politicians of the left hate business so much. They smear and defame basically the entire business community with their claims that employers are criminals who will break the law in return for a small cash incentive. They do the same with their opposition to allowing employees to choose whether or not to trade in one week of leave for cash. They claim employers will break the law and coerce employees into taking the money instead of the leave.
Experience rating ACC premiums provides an incentive to employers. For “good” employers the incentive is to have a safer workplace, to reduce their ACC premiums. For “bad” employers the incentive is not to make their workplace safer but to break the law and “bully” staff into lying about where their accidents happened.
Now if one had to divide all employers into one of those two categories, how many would actually break the law and bully their staff into lying? 5% perhaps, if even that? Yet Labour and the unions want all employers punished and treated as if they are all criminals.
For smaller firms – with an annual ACC bill below $10,000 – there will be a no-claims discount of 10 per cent if they generate no compensation claims. If they generate more than 70 days’ compensation claims they will incur a 10 per cent loading on their levies. For those in between there is no change.
The vast majority of employers will have ACC bills of below $10,000 – this is a wage bill of under around $5 million.
Your ACC premium is around 2% of your wage bill. A 10% reduction means that a company will save 0.2% of its wage bill, if it gets the no claim bonus. Does Labour really think scores of businesses will break the law just to save $2 on every $1,000 of wages.
For firms with an ACC bill larger than $10,000 the system is more complex and could mean adjustments of up to 50 per cent, up or down, in their levies. There are two layers to the adjustment.
The more important, the experience rating modification, compares the firm’s performance with the other firms in its levy risk group, with a 75 per cent weighting for rehabilitation costs, including income compensation, and 25 per cent for medical costs.
That could result in adjustments of up to 35 per cent either way in a firm’s levies, depending on their relative performance.
Now consider you are a larger employer, and you have ACC experience rating. Here the incentives are larger to keep claims down. However it would be near impossible to “fiddle” the system with a larger number of employees making claims.
In a small business, it is conceivable that you might get one employee to claim an accidient happened outside the workplace, and get away with it.
But in a large workplace, you’d need to have many injured employees agreeing to break the law and file false details on their claim (remember the employee files, not the employer). And it takes just one employee to blow the whistle and say their employer asked them to lie.
Also the employer needs to have a corrupt safety officer on staff, who will falsify the accident log, and not record workplace accidents if the employees agrees to lie about where it happened.
Now sure there may be a handful of venal and corrupt employers who will risk criminal penalties by engaging their staff in a conspiracy to defraud ACC. But that is no reason to not provide incentives to the vast majority of employers, which rewards them for having safer workplaces.
The average employer reacts rationally to incentives. Oh if we have fewer accidents, we pay less to ACC. So what can we do to minimise accidents. Labour and the unions are defneding a system where an employer with no workplace accidents at all pays the same premium as a company (same size and industry) that has multiple workplace accidents.
April 5th, 2011 at 12:07 pm
I wonder whether, under the current system, there is an incentive for an employee to claim that an accident happened at work when it didn’t really?
I wonder whether there is any significant incidence of people telling porkies in this way, or stretching the truth?
I wonder whether this new proposed scheme might suddenly give an employer an incentive to do something about that, instead of turning a blind eye?
I wonder why the union movement and the left never mention that moral hazard whilst they’re busily tarring all employers as being potential criminals at the sniff of a small amount of money?
Vote:April 5th, 2011 at 12:20 pm
It was the nationalizing of ACC under Kullen that permanently turned off most people I know to Labour. Seriously the nail in the coffin where there used to be a bit of sympathy. I can still see Kullens smirking superiority complex twisted face when he announced it.
So it doesn’t surprise me they shriek hysterically at anything resembling common sense around ACC.
Pricks
Vote:April 5th, 2011 at 12:23 pm
Oh if we have fewer accidents, we pay less to ACC.
Oh if we have fewer accidents we have less employee down time, we have better productivity, and we pay less to ACC.
Union members don’t have to work for employers who they think may act illegally, and they don’t have to work for employers who they think will diddle them out of every cent possible, and they don’t have to work in unsafe workplaces.
Vote:April 5th, 2011 at 12:25 pm
2% may be average but there are a lot at 4% and maybe more. Now that changes the equation for the unscupulous.
Consider Transocean just paid its executives a saftey bonus despite losing how many men in the Mexico oil rig drama.
I’m not suggesting that the average employer is like that but I get a slightly suspicious mind when I see some of the non injury hour claims made on various sites. Especially places like building sites where even a hammer hand can hit their thumb on a bong morning.
Still a good change.
Vote:April 5th, 2011 at 12:49 pm
wtf?
Vote:April 5th, 2011 at 12:51 pm
The unions, Labour and the Greens make these claims because they would act like that if they were employers.
Vote:April 5th, 2011 at 12:51 pm
“a system where an employer with no workplace accidents at all pays the same premium as a company (same size and industry) that has multiple workplace accidents”
There are already schemes in place that medium sized businesses can receive discounts off the ACC bill (up to 20%) by proving the quality of their Health and Safety systems.
By factoring costs based on accidents you are undermining the no blame ethos that ACC has always been founded on.
[DPF: Not at all. The injured employee gets treated regardless of his or her blame for what happened. The employer has the accident count as a work place accident for them, regardless of whether the employer was to blame]
Vote:April 5th, 2011 at 1:05 pm
A 10% no claims discount is bugger all for the many thousands of sole owners who go for years and decades without claims. They are still paying far too much.
JC
[DPF: My business has paid tens of thousands in ACC premiums and AFAIK has never had a workplace accident requiring ACC]
Vote:April 5th, 2011 at 1:16 pm
“…the corporations sit there in their, in in their corporation buildings and, and and see that’s, they’re all corporationy, and they make money.”
Vote:April 5th, 2011 at 1:32 pm
My premiums halved when I opted out. I have to say I am hugely dissapointed that nearly 3 years after the election Smith hasnt opened things up for competition yet, the ETS he rammed through in a few months which is a stark reminder of how poor the Nats have been to the people who voted them in.
A 10% discount on a stupidly high bill is not something the Nats should be especially proud of.
[DPF: The ETS was passed before the election. National amended the ETS after around a year of consultation so that its impact on consumers and businesses would be lessened]
Vote:April 5th, 2011 at 1:46 pm
Sounds like Labour and unions are happy with the rate of accidents and deaths happening in the work place and dont want anything to change.
Workers party I think not.
What Labour and unions are advocating is to allowing workers to be injured and killed to continued to occur and socialising those costs across all work places and workers through the ACC levies.
Didnt I see Phil Goofy this morning complaining about this on TV this morning. Dumbass.
How do lefties hold two competing thoughts in their head at the same time. Doesn’t that require insanity.
Vote:April 5th, 2011 at 1:49 pm
I moved my one man software development business from Melbourne to Nelson in 2006 and went from paying $350 in Workers Comp insurance to $2800.
But of course I haven’t factored in the exchange rate.
And the WC insurance I paid in Melb. didn’t cover rape victims.
Vote:April 5th, 2011 at 3:57 pm
@ PaulL (12.07)
“I wonder whether, under the current system, there is an incentive for an employee to claim that an accident happened at work when it didn’t really?” – I don’t think so, but not many people know that.
“I wonder whether there is any significant incidence of people telling porkies in this way, or stretching the truth?” – I know of cases where employees have had an accident at home (resulting in a few weeks off work) and claimed the accident happened at work, because they were worried it might make a difference. The employer found out soon after, and although wasn’t happy with it, doesn’t challenge it. (because of the perceived difficulty of getting it corrected, and it makes little difference to the result)
“I wonder whether this new proposed scheme might suddenly give an employer an incentive to do something about that, instead of turning a blind eye?” – Only if they think they can get the record corrected without too much hassle from the bureaucrats. I suspect many SMEs will just continue to tolerate a few “false accusations”
“I wonder why the union movement and the left never mention that moral hazard whilst they’re busily tarring all employers as being potential criminals at the sniff of a small amount of money?” – afaik employees don’t actually benefit from falsely accusing their employer, it’s just that they *know* that if it happened at work… Also, this could end up such that employers have an incentive to improve the safety of their employees even when they’re not at work.
Vote:April 5th, 2011 at 6:21 pm
[DPF: The ETS was passed before the election. National amended the ETS after around a year of consultation so that its impact on consumers and businesses would be lessened]
Don’t bring it up David, National (and Key in particular) have yet to explain why they put this dog through afte slating it so vehemently not too many years ago. It’s in the Hansard, don’t make me find it again. It’s one of the reasons I voted National, their absolute ridicule of this legislation was beautiful to behold. It was a piece of shit, it would cripple NZ competitively, it was unproven science. Still they impose another tax on the population of NZ. Many times I’ve seen people ask why? Never seen an answer yet.
Vote:April 5th, 2011 at 7:14 pm
Ouch. True Kaya.
Vote:April 5th, 2011 at 8:42 pm
I suspect you’ll see little difference in the level of accidents. The approach is just as ideological as Labour’s decision to remove experience rating. Health and Safety in NZ workplaces is highly regulated, and for that reason, the vast majority of accidents won’t be stopped because the business has a financial incentive to reduce them.
The major problem with this move relates to work-related gradual process and industrial disease claims. These can only be accepted if they are work related. This move is likely to see more claims for OOS, work-related hearing loss, etc challenged – end result: the injured people will get no cover at all.
As for DPF’s suggestion that businesses need to be corrupt: Rubbish. Just before the move to Privatise/Open up to competition, we saw many companies going through their claims history, and challenging claims that had previously been accepted unchallenged. Why? Because they wanted to reduce their liability. In most cases, this isn’t a case of “falsifying” records, but rather challenging the employees version of events.
“Labour and the unions are defneding a system where an employer with no workplace accidents at all pays the same premium as a company (same size and industry) that has multiple workplace accidents.”
Again – because employment type is a much better indicator of risk. The claims that are significantly costly to make a difference to levies/premiums happen very, very rarely. I’m sure you’re not advocating pure experience rating – I’m not sure many businesses would appreciate having to pay circa $30m in lifetime costs if someone was paralysed due to an accident at their business. In reality, the bulk of the system is still based on risk-rating for type of business.
This change will have very little effect (if any) on the accident rate, but will result in significant additional suffering for those people who are excluded from the scheme. It’s always really interesting to see how people go from complaining about levies to arguing for more entitlements once they are injured.
Vote:April 5th, 2011 at 8:54 pm
Sorry – having experience ratings is ideological, not having them is ideological. What would a non-ideological solution look like? If there isn’t one, then that means choosing between Labour’s ideological position and National’s. I know which one I’d choose if that’s the size of the choice.
Vote:April 6th, 2011 at 3:28 am
PaulL
Sorry – perhaps I could have been clearer. The arrangements aren’t ideological in themselves, but the motivations for Labour and National to remove/introduce experience rating are.
Vote:What I was trying to say, is that it would be nice to see some evidence that supports the change. I’d be surprised if there is any drop in injury rates, and if I’m right, and there aren’t, the only change will be a slight redistribution of costs inside risk groups (with the total remaining the same), and more work for the actuaries.
April 10th, 2011 at 9:10 am
@ [DPF: Not at all. The injured employee gets treated regardless of his or her blame for what happened. The employer has the accident count as a work place accident for them, regardless of whether the employer was to blame]
Yes true they all get treated but…
Imagine you are self employed, you trip over in your office one day and injure your wrist, the next day you go see the physio to seek treatment do you a) Say you did it at work and lose your $20 per year experience bonus or b) say you did it at home.
Example 2. Employee has a car accident, employer loses his experience ratings, when it comes time for pay review employee get no pay rise as employer feels like employee has lost him money.
The problem with this scheme is that it incentivises for small employers to not have accidents (trips and falls in particular) reported at work or for small employers to blame employees when they have accidents because it loses them money.
I do agree that it also incentivises employers to create a safer working environment, but i believe any employer (especially if they are struggling) will attach some notion of blame to an employee for having an accident as it effects there ACC bill, thus removing the notion of no blame that ACC is built upon.
Vote: