New Zealand insurers have “cautiously” welcomed the Government’s proposal to open up the Accident Compensation Corporation’s (ACC) workers’ compensation account to private competition, fearing history could repeat itself.

In 1999 the National Party government privatised the ACC, only to have it renationalised the following year when Labour under Helen Clark came into power. Insurers’ investments in people and systems were lost.

ACC Minister Nick Smith says this time the Government isn’t moving to privatise the system, but instead opening up the market to competition.

Announcing the move last week with the release of a discussion paper on the issue, he said the approach being taken this time “is common overseas”.

The paper says the move will remove the prohibition on the private sector being able to offer a workers’ compensation service, and that a mix of private and public provision of services is “most common among developed countries”.

“While no country has exactly the same model as us, there is a mix of state and private cover for workplace accidents, including in Switzerland, Denmark and Finland,” Dr Smith said.

Insurance Brokers Association of New Zealand CEO Gary Young says the industry believes the plan “is a good move”, but admits brokers and insurers are wary of a future government reversing the decision.

“Back in the late ’90s it was briefly opened up to competition and there was a big improvement in rehabilitation rates, but that only lasted a year and that wasn’t long enough,” he told insuranceNEWS.com.au.

“The real concern now is that if they bring this in it needs to stay and not be another one-year wonder.”

He says insurers “don’t want to commit huge expense only to have it pulled again”.

Vero NZ’s new CEO Gary Dransfield last week questioned the timing of the proposal, saying the Christchurch earthquakes have significantly affected the industry. The NZ Government has pledged to support AMI Insurance, which may have exposures of up to $NZ1 billion ($761 million) and Mr Dransfield believes it may be “politically difficult” to open the ACC scheme to private competition.

But Dr Smith says in the worst-case scenario of an insurer becoming insolvent the ACC would take over claims management and the costs would be met by a levy on all workplace insurers.