ACC: Everything you need to know

About ACC

The Accident Compensation Corporation (ACC) is a New Zealand insurer that provides injury cover to all residents and visitors, and provides health and rehabilitation services to anyone who is injured as a result of an accident.

Everyone in the country is covered by ACC’s no-fault scheme including children, beneficiaries and students, regardless of whether they are working, unemployed or retired. The cover helps pay for the costs of hospital treatment, help at home and at work, and the costs of any potential income loss.

The Crown entity is funded primarily by income from its investments. It also receives funding from the government, and from levies collected from everyone who works and owns a business in New Zealand.

“Our vision is to create a unique partnership with every New Zealander, improving their quality of life by minimising the incidence and impact of injury,” ACC states. “We touch the lives of a large number of New Zealanders. Our role is to make sure that all these groups’ needs are met, and making sure our clients get the right care at the right time, while keeping levies fair.”

History

New Zealand’s first ‘no fault’ system was established in 1900 in the form of The Worker’s Compensation Act. The Act required employers to insure all of their employees for injury, give weekly compensation payments to injured workers, and compensate the families of workers who died as a result of an injury.

In 1973, the Labour government passed an amendment providing cover for students, people who weren’t in employment and visitors to New Zealand, thus significantly expanding the reach of the scheme.

ACC as it exists today was born in April 1974, when the government established the Accident Compensation Corporation to manage the various compensation programmes.

Almost 15 years later the scheme underwent a significant review with The Law Commission recommending a number of changes in 1988, and, in 1991, ACC Minister Bill Birch announced several changes which came into effect with the Accident Rehabilitation and Compensation Insurance Act. These included covering employees’ non-work injuries, introducing discounts for employers based on claims history, and separating the scheme into different accounts.

The Accident Compensation Act of 2001 made even more changes to ACC legislation, and put greater focus on injury prevention and rehabilitation as a main function of ACC. The 2001 Act sets out how ACC runs today.

ACC’s investments

The biggest chunk of ACC’s funding comes from its extensive investment portfolio, 77% of which is invested in New Zealand. The portfolio favours long-term investments which deliver reasonably stable streams of income, and has grown from $8 billion in 2008 to more than $50 billion in 2022.

ACC regularly reviews its asset allocations to ensure they provide the best balance of risk and expected returns, and actively manages its portfolio to gain better risk-adjusted returns.

“We take a number of other factors into consideration when deciding what to invest in, including, but not limited to, an ethical investment policy,” ACC states. “This policy requires us to consider the ethical implications of our investments alongside operational risk.”

“We have outperformed market benchmarks for 25 of the past 26 years. To the best of our knowledge, no other investment fund anywhere in the world has ever outperformed market-based benchmarks on such a consistent basis.”

A year in the life of ACC: facts and figures

ACC has published its annual report for the financial year 2020/21, bannered by a $10 billion surplus. ACC board chair Steve Maharey credited the result to rising interest rates and strong investment returns.

As interest rates went up, these affected the discount rate used to value the expected future costs of injury claims on ACC’s books, also known as the outstanding claims liability, which decreased by a net $6.1 billion. In the two previous financial years, ACC recorded a deficit of $15 billion, mostly due to interest rates hitting historical lows.

According to Maharey, the results again demonstrate the sensitivity of the injury compensation scheme to movements in interest rates – factors which are outside of ACC’s control.

“With the size of the scheme growing larger and larger to cater for the needs of New Zealanders, sizeable surpluses or deficits shouldn’t be unexpected,” Maharey said. “Any surplus ACC makes is not a cash profit. It’s reinvested back into the scheme to ensure New Zealanders pay less in levies.”

ACC’s investment fund also had a strong year, with a 10.4% return, translating to $4.8 billion of income – $3.4 billion higher than budgeted. The company’s net investment assets were $50.3 billion.

A total of 2.1 million new claims were registered for 2020/21, a 13.1% increase from 2019/20. The growth was mostly due to an unusually low number of claims in 2019/20 resulting from COVID-19 lockdowns. This, in turn, impacted rehabilitation and return-to work rates, which were below target for most of the 2020/21 year.

ACC also recorded its highest-ever quarterly trust and confidence result of 72% for the July-September 2020 period. This raised the company’s annual 12-month rolling result to 67%, exceeding the target of 64%.