Self-employed clients who rely on the Accident Compensation Corporation (ACC) for income protection are paying more for cover that has never extended to illness. With levies rising and every levy-funded account falling short of the cost of new claims, that gap is becoming harder for brokers to leave unaddressed.
ACC's 2026 Annual Report recorded a net deficit of $961 million for the year ended June 30, 2026. That was well below the budgeted $2.9 billion deficit, but the shortfalls are broad.
For 2026/27, the Motor Vehicle Account faces a $382 million gap, the Work Account a $161 million gap and the Earners' Account a $534 million shortfall, according to ACC's levy consultation documents published by the Ministry of Business, Innovation and Employment (MBIE). The government-funded Non-Earners' Account carries the largest gap, at $761 million.
Read next: ACC's rehabilitation gains mask a growing levy risk
ACC covers accident-related injuries, but not illness. A self-employed client who is unable to work because of a heart condition, cancer or a mental health condition not caused by an accident receives nothing from ACC, however much they have paid in levies.
That makes the levy increases a prompt rather than the problem itself. Rising levies do not reduce what ACC pays an injured client, but they do raise the cost of cover that leaves illness unprotected. For clients who have never reviewed their position, that is the conversation brokers can open.
The Financial Services Council's (FSC) February 2026 State of the Sector report identified New Zealand as one of the most underinsured countries in the Organisation for Economic Co-operation and Development (OECD). It recorded 4.13 million life insurance covers in force, a figure that counts policies rather than people, across a population of more than 5 million.
Stats NZ's Household Labour Force Survey recorded about 354,000 people working for themselves without employees in the December 2025 quarter. That group pays levies directly and is the most reliant on how ACC calculates compensation.
Levy rates have already been climbing. The average motor vehicle levy rose from $113.94 to $122.84 per vehicle for 2025/26, and to $131.94 for 2026/27, as published in the New Zealand Gazette. The work levy moved from $0.66 to $0.69 per $100 of payroll over the same period. ACC has previously flagged that rehabilitation gains alone will not offset the growing levy risk.
For self-employed clients, the uncertainty is not only about cost. Standard ACC weekly compensation for self-employed people is calculated from prior-year tax returns, which can leave payments well short of current earnings, particularly for those whose income has grown or fluctuates.
CoverPlus Extra (CPX) addresses that by letting self-employed people and non-PAYE shareholder-employees agree a fixed weekly compensation amount upfront. CPX policy numbers edged down from 36,055 to 35,285 during the year, according to ACC's Annual Report. For a self-employed tradesperson or contractor who has not reviewed their cover recently, CPX is one part of the conversation. Private income protection for illness is the other.
Read next: Improving return-to-work rates are not enough to close ACC's claims gap
The largest single source of pressure on ACC's finances falls on the government-funded Non-Earners' Account rather than the levy accounts self-employed clients pay into. It stems from the Court of Appeal's December 2023 decision in Accident Compensation Corporation v TN [2023] NZCA 664.
The court upheld a High Court finding that survivors of childhood sexual abuse are eligible for loss of potential earnings compensation based on the date the mental injury was suffered, not the date treatment was first received. For many survivors, that moves eligibility back decades.
Since September 29, 2025, all new requests for financial entitlements from Sensitive Claims clients have been assessed under this framework, according to ACC's provider guidance. ACC must now reserve for claims from survivors who have not yet come forward, which increases its outstanding claims liability.
In 2025/26, the outstanding claims liability linked to Sensitive Claims increased by $4.1 billion, according to the Annual Report. About 14,500 new Sensitive Claims were registered during the year, around 3,000 clients are receiving weekly compensation or loss of potential earnings payments, and ACC is managing 33,500 Sensitive Claims in total.
The Non-Earners' Account carries most of that exposure. Its funding ratio fell to 40.4%, well below the 100% policy target.
ACC's Turnaround Plan, launched in January 2026 following three independent external reviews, has produced measurable results. The long-term claims pool fell from 24,549 to 24,454, the first reduction in more than a decade. Excluding Sensitive Claims, the pool dropped by 804 clients, or 3.6%.
ACC said slower long-term claims growth coincided with faster early return-to-work rates. The 28-day return-to-work rate reached 37%, and 92% of clients returned to work within one year. Claims costs of $8.2 billion came in 7% below budget and less than 1% higher than the prior year.
Stewart McRobie, deputy chief executive corporate and finance at ACC, said the results reflect a renewed focus on recovery. "More New Zealanders are recovering sooner, spending less time on the Scheme, and returning to work and independence faster," McRobie said.
Those gains help ACC's finances. They do not change what ACC covers. For self-employed clients relying on ACC alone, an illness that stops them working remains entirely uninsured unless they have arranged private cover.
