The New Zealand Government is moving quickly to open up its monopoly personal injury insurer, the Accident Compensation Corporation (ACC), to competition. But not before a political and media furore.

Last week the National Party government of Prime Minister John Key announced it will introduce the ACC Reform Bill in Parliament this week after securing support from its coalition partners the ACT Party and the Maori Party.

National intends to open the ACC’s workers’ compensation account to competition only after receiving a report from the steering group considering the stock take of ACC accounts.

The Government sparked outrage when it tried to introduce the bill into the House of Representatives last week proposing increased premiums and reduced entitlements.

The insurance monopoly has always been a contentious topic, with some holding it up as a pillar of accident compensation schemes and others saying it has led to an increase in workplace claims, partly from insurance cheats.

According to the local insurance industry, there are plenty of questions yet to be answered. Will it be just the so-called work account that is opened up for competition, or will the motor account be privatised as well? Or will the ACC simply contract out the third-party administration of the business?

Insurance Council of NZ (ICNZ) CEO Chris Ryan told insuranceNEWS.com.au that at the moment “it’s all pretty much unknown and lacking in detail”.

“So yes, we strongly support competition and believe there are real benefits for New Zealanders within a competitive market simply because it provides choice,” he said. “But as an industry we really have to wait and see what the details of the introduction of competition are.”

Adding to the uproar, the opposition Labour Party has named “Australian insurers and law firms” as the only winners in the “privatisation” of the ACC “at the expense of hardworking New Zealanders”.

Leader Phil Goff says Merrill Lynch predicts billions of dollars of premiums will go to Australian companies and more than $200 million in profits.

“Last time National tried this in 1999, Labour cancelled the scheme because it was not serving the interests of ordinary Kiwis,” he said. “That leaves just the insurance companies who are circling at the moment in anticipation of getting their hands on big profits.”

Vero NZ CEO Roger Bell told insuranceNEWS.com.au the debate around opening the ACC up to competition is fierce because NZ’s two main parties hold such different ideologies on the issue.

“I wish they would concentrate on the claims outturns,” he said. “The NZ [personal injury claims] environment is unique in the world, and based on the data available to us, it is clear NZ has a very disappointing record of workplace accidents.

“And for that one year in 1999 when competition was introduced it improved dramatically.

“So I would say to any politician, I wish they would acknowledge that there are some benefits for employees in NZ and therefore benefits to the economy, and conduct the debate along those lines rather than straight ideological lines.”

There is little doubt the issue has been highly politicised, particularly around the fear that the scheme will be privatised and the right to sue – given up many years ago – will be brought back, creating huge liability costs.

Mr Ryan says by all accounts it seems the ACC will stay in place, the no-fault scheme will be retained and 24-hour coverage retained. And insurers will be required to compete with the ACC in a competitive market.

“Comparing the NZ system to the Australian system is unfair because NZ doesn’t have the litigation costs and it’s a no-fault scheme,” he said. “If you look at the two schemes and put litigation aside they cost roughly the same.”

Mr Bell says whenever this subject comes up there are scare campaigns about the scheme creating American-style litigation.

“There’s absolutely no discernable lobby in NZ to go back to common law rights,” he said. “The lawyers don’t ask for it and we’ve had 35 years of this unusual legal environment.

“It makes our exports cheaper because they’re not having to build into huge liability premiums. And as an insurer it makes the environment more predictable – you can cost your premiums more accurately because you don’t have to anticipate difficulties with courts.”

The fact that the scheme is losing money still needs to be addressed and like it or not New Zealanders will need to pay more.

It’s a form of insurance, and premiums must rise to counter the enormous deficit. But to keep those premiums competitive, and on the promise the scheme will stay the same, perhaps opening up competition to insurers is the way to go.