Recommendation with Minister

Simplifying our Experience Rating Programme

We’re proposing to simplify our Experience Rating Programme. We’d like to know what you think.

Our recommendations to the Minister

What we asked

We asked you about our proposal for the 2019 to 2021 levy period to make changes to the Experience Rating Programme to take effect from 1 April 2020.

What you told us

We received overwhelming support for this proposal:

  • Submitters told us changes will simplify the programme and make it easier to engage
  • In particular, submitters highlighted the benefits of making the experience rating calculation more transparent and giving greater weight to recent experience.

Those who were opposed to the proposal said that the experience rating calculation remains too complicated or suggested alternative approaches to calculating the rating.

  • A few felt it was unfair that the Experience Rating Programme applies only to large businesses
  • There was strong opposition from submitters to increasing the penalties for business’ levies in the event of a fatal accident. While a few submitters believe the fatal modifier will provide greater incentive to employers to manage the risk of fatalities, most submitters tell us that employers are already doing their best in this area and that workplace fatalities can happen, regardless of a business’s efforts.

Our recommendation

The ACC Board recommends:

  • Implementing the following changes to the Experience Rating Programme to take effect from 1 April 2020:
    • remove the industry modifier and smoothing adjustment from the current calculation
    • introduce the following weightings to the three years of experience used in the calculation:
      • Year 1 (most recent) 100%
      • Year 2 - 70%
      • Year 3 - 40%
    • lower credibility thresholds to allow more of an individual business’ claims experience to be factored into the calculation
    • introduce set penalty and discounts levels that correspond to a range of performance scores
    • increase the maximum penalty from 75% to 100%
    • introduce a fatal modifier as the final step in the Experience Rating calculation.

We acknowledge the support received for the proposed changes to the Experience Rating Programme.

Improving transparency and decreasing the complexity of the Experience Rating calculation is expected to improve injury management and prevention outcomes.

We've noted the feedback around the calculation remaining too complicated, and the proposed alternative approaches. The recommended changes are the beginning of a wider programme of ongoing work to make Experience Rating more understandable to levy payers.

We also acknowledge the feedback that Experience Rating should also be available to smaller businesses and self-employed. We'll investigate the expansion of Experience Rating to smaller businesses as part of our review of the No Claims Discount programme over the next two years.

Reducing fatal injuries in the workplace is a primary objective for the Government and ACC. We've noted the feedback received around the fatal modifier but until New Zealand has fatality rates equal to that of the best in the world, we believe that not enough is being done to avoid these injuries.

We believe a penalty such as the one proposed, is warranted to help reinforce the need for businesses to mitigate their critical risks appropriately.

We'll have a decision from the Government on our recommendations in December.

Our original proposal

Experience Rating applies to large businesses who pay annual ACC levies of $10,000 or more. Around 15,000 businesses qualify, covering around 40% of the total payroll.

Currently, employers with a good claims history receive discounts of up to 50% on their Work levies. Employers with a negative claims history may receive a penalty of up to 75%.

We proposed the following changes to our Experience Rating (ER) Programme for the 2019-2021 levy period

Change one

Simplifying the experience calculation

Change two

Improving the responsiveness of the levy to changes made by a business

Change three

Strengthening consequences for poor performers

More information

If you want more detail on this topic and the reason we proposed this, see our full consultation document.

ACC levy proposals for the 2019 to 2021 levy period
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27 Sep 2018
Open for feedback

We were open for feedback from 27 September to 25 October 2018.

25 Oct 2018
Closed for feedback

We've reviewed your feedback. Thanks for telling us what you think!

Nov 2018
Recommendation with Minister

We've reviewed your feedback and based on what you've said we've made recommendations to the Minister. 

Dec 2018
Changes confirmed

Based on your feedback and agreement from the Minister, we've now confirmed our changes. Have a look at the topic to see what we've agreed.