Smith Nick: Injury Prevention Rehabilitation and Compensation Amendment Bill — Second Reading 
Smith Nick: Injury Prevention Rehabilitation and Compensation Amendment Bill — Second Reading 
[Volume:660;Page:9052] 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 I move  
That the Injury Prevention Rehabilitation and Compensation Amendment Bill be now read a second time 
. This bill addresses problems in accident compensation which has become financially unsustainable. Reform is required to secure its long-term future for all New Zealanders. 
The 2008-09 annual report of the Accident Compensation Corporation (ACC) showed a loss of $4.8 billion—almost half the $10 billion Government deficit last year. This loss comes on top of a $2.4 billion loss for the previous year. Over the past 4 years the accident compensation scheme’s unfunded liabilities—that is the difference between its liabilities and its assets—have grown from $4 billion to $13 billion. This is a significant and serious problem that cannot be ignored. 
The underlying issue for the scheme is the steep increase in claim costs—up 57 percent in the last 4 years or rising at five times the rate of inflation. The scheme cannot sustain the ongoing increases in claim costs arising from greater claim numbers deteriorating rehabilitation rates and unfunded scheme extensions. The underlying problem is that accident compensation has drifted away from being a State insurer to being an extension of the welfare State. 
This bill is a key part of the Government’s reforms to accident compensation that are needed to make the scheme affordable sustainable and fair. 
Mr SPEAKER 
: I apologise to the Minister but I say to members that it is the height of rudeness to the House for them to stand with their backs to the Chair engaged in loud conversations with colleagues. It is totally unacceptable. Not only is it rude to the member speaking it is rude to the House and I will not tolerate it. It is unacceptable. I apologise to the Hon Dr Nick Smith. He has the floor. 
Hon Dr NICK SMITH 
: I welcome the diligent and good report that has been produced by the Transport and Industrial Relations Committee along with its recommendations and I thank both the committee and the officials for the hard work that they did in progressing this bill. I particularly acknowledge that effort given the tight timetable in which the Government has had to advance this bill in order to minimise levies for so many New Zealanders in the year ahead. I also acknowledge and thank those who took the time to make submissions on the bill. 
The changes in this bill are part of a wider reform of accident compensation that began with changes to the ACC board in March last year the stocktake that we announced in August and other regulatory and operational changes that we are making to ensure we meet those objectives. The main purpose of the bill is to increase flexibility in the accident compensation scheme to facilitate cost containment to provide for closer working relationships between ACC and other Government agencies and to improve the financial reporting and accountability of ACC so that in future we are not caught by surprise by very large multibillion dollar losses. 
The main amendment contained in the bill will extend the date for fully funding residual claims out from 2014 to 2019 require that there be a final valuation on those residual liabilities and fold those accounts into the main accounts. The intention in 1998 was that accident compensation would be fully funded by 2014. Good progress was made in the years through to 2004 but over the last 5 years the costs of accident compensation have grown so extraordinarily that it will involve huge increases in levies for earners for businesses and for motorists to meet that full funding date of 2014. That is why the Government with the support of the select committee wants to make that change. 
Other amendments reverse changes to the test for gradual process conditions in order to remove the presumption that accident compensation should automatically provide cover introduce a cover threshold for injury-related hearing loss and rescind changes made to weekly compensation eligibility and entitlements that were made in 2008. I express a strong concern that even in June 2008 when the previous Minister for ACC reported to the House a $2.4 billion loss within the accident compensation scheme it was nothing short of reckless and irresponsible to add a further 12 entitlements to the scheme in the months that followed prior to the general election thus exacerbating the financial problems the scheme now faces. 
The bill also allows experience rating and risk sharing to be applied to levy rates in the work account and risk rating to levy rates in the motor vehicle account. It strengthens the disentitlement provisions for offenders and reintroduces disentitlement for wilfully self-inflicted injuries and suicides. I particularly draw to the attention of the House the provisions in this bill that will disentitle those who commit criminal acts and then expect accident compensation to provide full entitlements. I get repeated letters from New Zealanders all over the country frustrated by that process and Parliament and this Government are rightly responding to that concern. 
The bill also includes some operational improvements and technical changes to improve its flexibility. The select committee received 133 submissions and has recommended only minor changes to the bill to clarify the provisions relating to cover for hearing loss and the full funding regime for those residual liabilities and to improve on the provisions around experience rating and risk sharing in the work account. They have also made some minor changes to the financial reporting requirements to ensure that they are effective and some technical changes around the disentitlement for criminals. 
I thank the committee for the work it did in making changes around risk adjustments risk sharing and experience rating to ensure that they cannot be applied to the portion of levies that is necessary to fund the residual amount. That is a sensible change because although experience rating which provides incentives for businesses to have a safer work record should properly apply to current levies the select committee has quite appropriately determined that it not apply to historical residual levies. The select committee has also made amendments to clarify that the 6 percent threshold on cover for hearing loss applies to hearing loss only from a covered or accident-related cause. 
The committee has also recommended amendments that clarify the provisions for disentitlement of offenders. These amendments clarify that offenders’ families are not entitled to compensation for fatal injuries to the offender and that a sentence of home detention is also covered in the disentitlement provisions. Clarifications have also been recommended to the extent of treatment to be provided for those disentitled offenders and that in my view is appropriate. Finally the committee has recommended amending the provision relating to the requirement that ACC report on its financial condition recognising that ACC cannot really be an impartial adviser on its own activities although we still want to proceed—and I commend the select committee—with ensuring those transparent financial reporting requirements. 
I give the House notice that as I have already announced it is my intention to bring a Supplementary Order Paper to the House to enable the specific motorcycle levy which has been so successful in reducing motorcycle accidents in Victoria to be introduced. 
I conclude by restating this Government’s commitment to the core concepts of the accident compensation scheme as a 24/7 no-fault insurer for all New Zealanders. To secure the future of accident compensation the scheme has to be affordable and financially sustainable. That is the underlying purpose of this bill: to reduce the pressure on levy payers created by the huge increases in the scheme’s costs and liabilities the increasing cost of residual claims liabilities and the rapid growth that has occurred in both claims and entitlement costs. 
This is a balanced bill that fairly reflects the rights of both levy payers and claimants and it will help restore the future of New Zealand’s unique accident compensation system.