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