Overview

The process for setting ACC levies 

ACC focuses on value for levy payers’ money. The services we fund, and our collection system, attempt to balance to the cost of ACC more fairly in our communities. For example, we collect some of the Motor Vehicle levy from each litre of petrol purchased to ensure people who travel more pay more than road users who travel less. 

The average (or aggregate) levies charged are built in three steps. 

Step 1: Forecasting the cost of future injuries  

We know a lot about injuries, such as how and when they happened. We combine this knowledge with trends in the population and then estimate how many injuries and what type of injuries we expect to support each year.  

We also use our experience in supporting injured people to estimate the types of support which will be needed and for how long. We can then calculate how much this support will cost. This cost is called the New Year Claims Cost. 

Rate of injuries and injury costs are rising 

We expect the costs of supporting people to recover from injury to increase by 4-6% each year – over the next four years, due to: 

a rising number of injuries (we are expecting 3.7 million claims from workers injured in and out of work, and 113,000 claims for people injured in road crashes, over the next four years) 

increases to the cost of providing support (treatment, rehabilitation, and loss of income). 

The rising costs of injuries need to be reflected in levies. 

We’re expecting $6.16 billion will be needed from levies to support the claims that are forecast to happen in 2025/26. By 2027/28, this is estimated to increase to $7.04 billion. 

Step 2: Calculating the average levy rate  

Once we’ve forecast the cost of supporting injuries, we then calculate the levy rate required to cover those costs. This is the amount we need to charge each levy payer. 

For the Work and Earners’ Accounts, the average or aggregate levy rate is set per $100 of liable earnings. We do this by taking the New Year Claims Cost and dividing it by the expected total salary of workers (subject to minimum and maximum earnings).  

For self-employed people, we use the income liable for ACC levies they will earn after expenses. 

Step 3: Our recommendations for the levy rates 

In this final step, we consider whether the Account has sufficient funds to pay for the support of injuries that have already occurred. 

We can then adjust levy rates to return towards the funding target of 100% over 10 years, for example, where funds in the Accounts are equal to the remaining lifetime cost of current injuries.  

Should levies need to increase, the Government’s policy is that we limit our recommendations for increasing the average levy rate to 5% each year (plus an additional allowance for expected inflation for the Motor Vehicle Account). There is no limit to the amount levies could reduce each year. 

Smoothing our changes to the levy rates 

How we approach this step is set out in the Government’s funding policy statement for ACC. 

We propose gradual adjustments to the levy rates between consultation rounds. This is because our goal is for levy rates to be as stable and predictable as possible. This means they’ll be more resilient to shocks and will provide certainty for levy payers on how much they’ll pay year-to-year.  

Accident compensation is by nature a long-term activity, with costs of supporting injuries (liabilities) that stretch over decades. In setting levies, we must consider the long-term nature of the claims they will fund, as well as giving levy payers reasonably stable levy rates over time.  

What our proposals mean for households and businesses 

The following examples show some possible impacts of our proposed changes to the levy rates.  

A family with a household income of $129,000 and three vehicles (currently paying $38.59 per week in levies) would pay $40.61 per week in 2025/26; $42.89 in 2026/27; and $45.19 in 2027/28. 

A family with a household income of $85,000 and two vehicles (currently paying $27.16 per week in levies) would pay $28.48 per week in 2025/26; $29.97 in 2026/27; and $31.48 in 2027/28. 

A small home construction business with 8 employees earning $70,000 each and a small fleet of three diesel driven ute/van and three petrol driven cars, (currently paying $189.75 per week in levies) would pay $178.98 per week in 2025/26; $186.55 in 2026/27; and $195.24 in 2027/28. 

Examples of the weekly impact of the recommended levies 

This is a significant investment by levy payers into the ACC scheme, which means everyone has a stake in ACC. 

Levy setting needs to be fair 

When considering changes to the levy system, we want to strike a balance between the money we need to collect and the need to be fair to levy payers. Fairness means: 

• we aim to keep levies as affordable as possible 
• levies stay as stable as possible over time 
• levy payers exposed to similar risks of injury pay the same levy; for example, businesses with a higher risk of injury, such as forestry, pay a higher levy rate than businesses with a lower injury risk, such as financial services 
• levy payers of the same grouping pay for the costs of the claims without being subsidised by other levy payers, whenever possible. 

Today’s levy payers fund today’s claims 

We manage funding of the levied Accounts on a fully funded basis. This means we aim to always have enough assets (money on hand) to pay for current and future costs of claims we have accepted to cover. When assets and costs are in balance the levies charged will be the cost of new claims for the year.   

If we have a surplus of assets, we reduce the surplus over time by discounting the levies we charge, and so levies will be lower than the cost of new claims. When our assets are lower than the future costs of current claims (they are insufficient) then levies will need to be higher than the cost of new claims to increase the assets to the right level. 

The Motor Vehicle Account and the Work Account currently have surplus funds which we propose to use to pay for claim costs and reduce the amount we need to collect from levy payers. However, levies will still need to increase, to avoid a large increase, when the surplus assets have been used up. 

The Earners’ Account (for non-work injuries for employees), has insufficient assets to cover claims costs, so levies need to increase to rebuild the assets. 

We know we’re responsible to people who are injured and to our levy payers to manage the Scheme as effectively possible. We work for injured people to get the support they need, when they need it, in order to get well sooner. 

We acknowledge that rehabilitation outcomes have not been as good as they could be, so people are staying on the Scheme longer they should. This aligns with international trends.  

This not only affects the injured person and their whānau. It also increases costs which affects levies.  

We’re working to improve our rehabilitation support for injured people 

• We’re improving client and provider experience by making sure that queries and requests are actioned, if possible, at the first point of contact. 
• We provide a one-to-one case management approach for new clients who are off work and those who can achieve a positive rehabilitation outcome. 
• We’re making changes to improve timelines and accuracy of elective surgery decisions, to ensure clients are getting the treatment they need at the right time. 
• We support businesses to play a larger part in a worker’s recovery through our recovery at work initiative. Keeping injured workers connected to their place of work is a key determinant of a successful early recovery from an injury and lower productivity loss.  

We’re improving how we purchase healthcare 

We’re a large funder of health services in New Zealand. We continually seek greater value for New Zealanders and deliver better recovery outcomes for our kiritaki (clients). 

ACC spends around $3 billion each year on services delivered by healthcare and support providers. The way we plan, purchase, and monitor these services is crucial to ensuring ACC is effective and sustainable. 

We have a range of projects underway to strengthen our health service commissioning approach. We focus on improving client outcomes and delivering health services efficiently and effectively. 

• We’re reviewing the way we commission some of our higher cost services, such as elective surgery and high-tech imaging services. This includes engaging with the healthcare sector to explore how we can ensure we’re delivering timely, high-quality services to our kiritaki in a cost-effective, equitable, and sustainable way. 
• We’re moving to a provider-led integrated care pathways approach for cohorts of clients with similar needs. Care pathways put the patient at the centre of their recovery. This approach brings together an interdisciplinary team of providers who work together to improve client outcomes and ensure kiritaki recovery needs are met. 
• We’re engaging with our partners in the public sector (including Health New Zealand – Te Whatu Ora and Pharmac – Te Pātaka Whaioranga) to explore opportunities to collaborate more closely and drive greater value for New Zealanders. One example is a joint programme with Health New Zealand to design a new approach to commissioning aeromedical acute care services. 
• We’re working to improve, automate, and digitise our systems, forms, and processes to make it easier for providers to work with us. This includes changes to our internal controls and decision-making processes that will improve timeliness, consistency and accuracy of treatment decisions – helping to make sure our kiritaki get the right care and support at the right time.  
• We have a team dedicated to monitoring provider performance and ensuring suppliers deliver on their contractual obligations. This includes engaging one-on-one with suppliers where required and providing feedback on their performance, as well as monitoring what suppliers are invoicing us for to ensure we’re paying correctly for the right services. 
• We’re investing in provider education and engagement initiatives, which are helping to build understanding of the boundaries of the Scheme, what’s expected of providers when they work with us, and how to interact with us efficiently and effectively. This includes helping providers understand how they can support their clients to recover at work, based on evidence that returning to work after an injury plays a beneficial part in recovery. 

We invest ethically and outperform the market 

ACC places some of the levies it receives into our investment portfolio. This investment generates future income to cover the costs that will happen in 30 or more years from now.   

Because we collect levies up-front and invest some of it for the future, the overall cost to businesses and communities of the ACC Scheme is reduced by 44%. 

ACC’s investment team has outperformed market benchmarks for 28 of the past 31 years. As at 30 June 2023, for every $100 invested in the fund in 1992 is now worth $1,572. 

The additional funds we earn from this investment help meet the costs of claims.  

ACC is a significant investor in New Zealand’s stock and bond markets and has holdings in most major financial markets. ACC’s Investment Fund is guided by an Ethical Investment Policy and is a signatory to the UN-supported Principles for Responsible Investment (PRI). This list of six principles provides an accepted and credible framework for incorporating ESG issues into ACC’s investment decision-making processes and ownership practices. 

We work to prevent injuries and improve the Scheme 

We invest in partnerships and programmes for injury prevention that work to reduce injury related risks in sports and recreation, workplaces, and the community.  

We are seeing the success of our ‘Have a Hmmm’ campaign and its community-driven programme to change behaviour. The programme is evolving and motivating a growing number of New Zealanders to take action to prevent injuries.  

Minimising injuries each year has many benefits, not only to the injured person, but also to: 

• the person’s whānau who may have to care for them 
• their employer who suddenly has a reduction in productivity due to the loss of a skilled employee 
• the wider community, such as a sports club or a charity, which can also be impacted when a member or colleague is injured. 
• There can only be a meaningful drop in injuries and their costs when all of us are playing our part. 

We invest in initiatives to improve road safety for everyone  

To help reduce the number and severity of motor vehicle related injuries, we’ve partnered with other agencies and created road safety programmes for new drivers, motorcyclists, cyclists, and people on scooters. These include: 

• supporting young Kiwi drivers with DRIVE 
• developing the Ride Forever programme for motorcyclists 
• developing Scooter Survival for scooter riders. 

These initiatives have reduced injury rates and costs.  

We partner to prevent workplace injury  

We take a collective approach, by partnering with the sector and system leaders who have high influence to achieve outcome and improve the health and safety system performance.  

An example of how we do this is investment in Workplace Injury Prevention Grants, which has provided $22 million over five years to help business groups establish harm reduction programmes targeting the sectors and grow innovation across the health and safety system. 

Over the past five years, there’s been good progress made in reducing the risks of a fatal injury at work. However, the overall risk of injury while working is increasing over time. 

We invest in preventing injuries outside the workplace 

For injuries that happen outside the workplace, we invest in media and partner with communities to support what they’re doing on injury and violence prevention. 

• The ‘Have a hmmm’ campaign is having a measurable impact on changing public behaviours around risk, with significantly more New Zealanders now reporting that they are taking steps to prevent injuries to themselves (138% increase) and to others (200% increase) since launching in April 2021.  
• We have a focus on violence prevention, addressing long-term root causes of intergenerational harm through greater scale and cohesion of activities with partners in Te Puna Aonui. 
• We partner with the Health Quality and Safety Commission, Ministry of Health, local community health providers, home carers, and community groups across the country to provide the online Live Stronger for Longer movement programme to help older people with their fitness and flexibility in order to prevent injuries from falls. 

In 2022/23, we invested $62.5 million in injury prevention programmes and we’re achieving a reduction in injury costs of $1.44 for every $1 we spend. 

You can see more examples of our injury prevention work on our website. 

ACC website

These efforts are seeing results. However, the overall volume and costs of injuries are still increasing. Improved performance, investments and injury prevention help us to maintain a low-cost Scheme and minimise how much we need to collect from levy payers.