Introduction to ACC

History of ACC in New Zealand

Early 1900s: New Zealand leads the way

New Zealand leads the way in workers’ compensation and motor vehicle insurance

New Zealand was an early leader in providing compensation for work injuries. We were also one of the first countries to recognise the social and financial consequences of accidents involving uninsured motorists.

In 1900 New Zealand followed the example set by Bismarck in Germany 12 years earlier, and introduced a ‘no fault’ workers compensation system. The Worker’s Compensation Act lasted (with some changes) until 1974, and provided injured workers with weekly benefits and, in case of death, compensation for dependents.

‘Injury arising from accident demands an attack on three fronts. The most important is obviously prevention. Next in importance is the obligation to rehabilitate the injured. Thirdly, there is the duty to compensate them for their losses,’ - Sir Owen Woodhouse in the 1967 Royal Commission report from which the ACC scheme was born.

The Act required that employers take out insurance to cover themselves for injuries to employees. Benefits provided by the Act were small and could only be paid for six years from the date of injury. Injured workers also had the right to sue an employer for negligence.

The Act didn’t cover non-work injury, or motor vehicle injury.

In 1928, under the Motor Vehicles Insurance (Third Parties Risk) Act, a compulsory third party motor vehicle accident insurance scheme was introduced. The scheme made sure that the victims of motor vehicle accidents could claim damages for personal injury.

1967: Woodhouse Commission recommendations

The Woodhouse Commission recommends a ‘no-fault’ accident compensation scheme

In 1967, as a result of complaints about the inadequacy of workers’ compensation benefits, a Royal Commission was established to report on workers’ compensation. The commission produced the well-known Woodhouse Report, named for its chairman Mr Justice Woodhouse (now the Right Honourable Sir Owen Woodhouse).

The report recommended a completely new ‘no-fault’ approach to compensation for personal injury. It recommended a scheme to cover:

  • all motor vehicle injuries, funded by a levy on owners of motor vehicles and drivers
  • all injuries to earners whether occurring at work or not, funded by a flat-rate levy on employers for the cost of all injuries to their employees. A levy on the self-employed to pay for injuries occurring at work or outside of work was also proposed.

Employers would have to pay a compulsory levy for injuries to employees, but they would also be protected from being sued for damages. The right to sue for motor vehicle injuries and non-work injuries to earners would also be removed.

The report recommended that the scheme be based on five basic principles:

  1. Community responsibility
  2. Comprehensive entitlement
  3. Complete rehabilitation
  4. Real compensation
  5. Administrative efficiency.

1974: ACC up and running

Accident Compensation Commission up and running

The accident compensation scheme came into operation on 1 April 1974 under the administration of the newly established Accident Compensation Commission (ACC). The Accident Compensation Act 1972, and the 1973 Amendment to that Act, defined ACC’s operation.

The 1972 Parliament voted unanimously to pass the Bill into law. The Act covered injuries to earners (both work and non-work injuries) and motor vehicle injuries. The Labour Government came into power later that year, and in 1973 passed an Amendment to the Act providing cover for those not already covered by the 1972 Act (including students, non-earners and visitors to New Zealand).

Three schemes were established under the 1973 Act:

  • the earners’ scheme, funded from levies paid by employers on wages paid to employees, and paid by self-employed people
  • the motor vehicle accident scheme, funded by levies paid by owners of motor vehicles
  • the supplementary scheme, covering those not covered by the earners’ or motor vehicle accident scheme. The Government funded this scheme.

Under the Act, ACC benefits included:

  • hospital and medical expenses
  • rehabilitation costs
  • associated transport costs
  • earnings-related compensation (payable from the seventh day after the accident at a rate of 80 percent of average weekly earnings before the accident)
  • lump sum payments for permanent loss or impairment
  • lump sum payments (up to a maximum of $10,000) for pain and mental suffering
  • funeral costs and lump sum payments to surviving spouses and children in cases of accidental death.

1979 – 1982: Reducing costs

Reducing the cost of the scheme and improving its administration

By 1979 there was growing dissatisfaction with the overall cost of the scheme, and employers had become increasingly vocal about paying the cost of non-work claims. The government established a Cabinet caucus committee chaired by the Hon Derek Quigley to review the accident compensation scheme.

The recommendations made by the Quigley committee included:

  • the claimant should pay part of the cost of the first two visits to the doctor (they could recover this from the employer in the case of a work accident)
  • the pause period for earnings-related compensation should be extended from one week to two weeks for non-work accidents (for work accidents the employer would pay compensation for the first two weeks)
  • lump sum payments should be abolished, except for serious cosmetic disfigurement
  • the levy system and the levy collection method should be reviewed.

As a result of the Quigley committee proposals, substantial changes were made to the Accident Compensation Act in 1982. More than 60 sections of the 1972 Act were deleted. The changes made included:

  • moving the funding structure from ‘fully’ funded to ‘pay-as-you-go’ funding
  • reducing employers’ obligations for providing weekly compensation from 100 percent to 80 percent for first week following a work accident
  • joining the three ‘schemes’ into a single scheme (which continued to be funded from the three levy sources)
  • moving work-related motor vehicle accidents from the earners’ account to the motor vehicle accident account
  • increasing the maximum amount payable for permanent loss or impairment from $7,000 to $17,000 (maximum payable for pain and suffering remained at $10,000).

1986 – 1990: More reviews

More reviews to the scheme

In 1986 a review of the scheme was undertaken. A committee was set up of representatives from ACC, the Department of Social Welfare, the Department of Labour, the Department of Health, and Treasury. The Officials Committee report, published in 1987, placed particular emphasis on the disparity between New Zealand's treatment of accident victims and the illness-disabled. Numerous other social policy reviews were also under way at this time.

In light of the 1987 report, the government asked the Law Commission (chaired at the time by Sir Owen Woodhouse) to review the accident compensation scheme. The Law Commission report, published in 1988, recommended massive changes.

Many of the recommendations sought to iron out the disparities between the government’s treatment of accident victims and those incapacitated by sickness or disease. Generally, accident victims receive greater compensation than victims of sickness.

The changes recommended in the Law Commission report included:

  • weekly compensation should be based on the average weekly earnings for all New Zealanders. Non-earners should also be eligible for weekly compensation assessed in this way. There should be discretion to increase this amount in order to avoid injustice in an individual case
  • the pause period for earnings-related compensation should be extended from one week to two weeks for non-work accidents (for work accidents the employer would pay compensation for the first two weeks)
  • lump sum payments (for permanent impairment or pain and suffering) be abolished and replaced with periodic payments
  • a Minister should be responsible for the promotion of safety and accident prevention, and for the rehabilitation of those seriously injured
  • ACC should produce detailed accident statistics
  • sickness, not just injury, should be included in the scheme
  • medical mishap should be included in the scheme
  • special provisions should be made for victims of sexual assault
  • the motor vehicle levy should be responsive to changes in the consumer price index
  • employers and the self-employed should not be charged based on their business activity; there should be one rate for all types of business.

The Labour Government considered these recommendations and, after further work by the Officials Committee, major changes were announced in the budget presented on 27 July 1989. The scheme was to be extended to cover those incapacitated by sickness or disease.

The National Government came to power in October 1990, and established another committee to review the scheme. The Employers Federation and the Business Roundtable demanded that employers stop paying for employees’ non-work accidents, and that the overall cost of the scheme be reduced. The terms of reference given to the Working Party suggested that one way to reduce the cost to society would be to provide greater freedom of choice between insurers and create competition between public and private sector insurers.

1992: Changes to funding and entitlements

Working towards a ‘fairer scheme’

After considering the Working Party report on the scheme, the National Government decided to make changes to the scheme. It was budget night 1991 when Bill Birch announced the changes in his paper ‘ACC – a fairer scheme’.

The resulting 1992 Accident Rehabilitation and Compensation Insurance Act included the following changes:

  • the scheme was separated into different accounts
  • an Earners’ Account premium was introduced to cover non-work injuries to those in paid employment. Employees paid for non-work injuries (instead of employers) through a premium collected by Inland Revenue
  • experience rating discounts and loadings were introduced for employers
  • entitlements, eligibility and rates were specified in regulations
  • the calculation of weekly compensation was prescribed
  • lump sum entitlements were replaced by independence allowance (a periodic payment)
  • the Accident Compensation Appeal Authority was scrapped. The District Court took over its role.

Further changes to the Act were passed into law in 1996 with the Accident Rehabilitation and Compensation Insurance Amendment Act. The changes included:

  • independence allowances were assessed using the American Medical Association Guides
  • independence allowance rates were increased
  • a procedure for assessing work capacity was put in place
  • ACC was now able to purchase health and rehabilitation services, reducing the waiting time for accident victims
  • the accredited employers programme was introduced.

1998: Private insurers for work-related injuries

Private insurers to cover work-related injuries instead of ACC

In 1998 the legislation changed again to allow private insurers to provide work-related accident insurance, starting from 1 July 1999. The 1998 Accident Insurance Act repealed the Accident Rehabilitation and Compensation Insurance Act 1992 and opened the competitive market for work-related injuries. Despite this, the basic principles of the scheme remained the same. Under the Act, ACC was excluded from providing the workplace accident insurance market. Self-employed people were allowed to choose to stay with ACC (which most did). The Office of the Accident Insurance Regulator was established to oversee the private market.

It was hoped that the new legislation would create more incentives for employers to make workplaces safer and to reduce the cost of injuries to society.

If employers did not purchase private accident insurance cover they could be forced to pay a significant penalty. A Non-compliers’ fund was set up to cover employees who were injured while working for an employer who had not taken out accident insurance.

The Accident Insurance Act 1998 also returned all accounts under the scheme to a fully-funded rather than a pay-as-you-go system. At this time ACC also established four profit-driven subsidiary companies − ACC Healthwise, Catalyst, Prism and DRSL (Dispute Resolution Services Limited).

2000: ACC restored as sole provider

ACC restored as sole provider of workplace accident insurance

Under the Accident Insurance Amendment Act and Accident Insurance (Transitional Provisions) Act passed in April 2000, the provision of workplace accident insurance returned to ACC. From 1 July 2000 ACC was again the sole provider of accident insurance for all work and non-work injuries for all New Zealanders. Private insurers could not provide insurance to employers after 30 June 2000, but they do continue to manage claims for injuries suffered between 1 July 1999 and 1 July 2000.

The accredited employer scheme (ACC Partnership Programme) was also re-introduced with the new legislation. Employers who join the programme take responsibility for managing their employees’ work-related injuries, and are given financial incentives to create safer work environments. Greater flexibility was provided for determining self-employed premiums.

2001: AC Act

Accident Compensation Act

Further changes to ACC legislation are contained in the Accident Compensation Act 2001. Most of the provisions in this Act took effect from 1 April 2002.

The Act maintains current entitlements and other provisions and includes:

  • greater focus on injury prevention as a primary function of ACC
  • greater focus on rehabilitation
  • new management of injury-related information across the different agencies within the injury prevention sector. The Act provides for an information manager to be appointed to oversee the collection of, and access to, data across the different government agencies
  • lump sum entitlements to be reintroduced for permanent impairment.

2004: ACC celebrated 30 years

April 2004 marked the 30th anniversary of the accident compensation scheme in New Zealand.

A 30th commemorate brochure, ‘30 years of Kiwis helping Kiwis’, was prepared to mark this occasion.

2005: IPRC Amendment Act 2005

The Injury Prevention, Rehabilitation, and Compensation Amendment Act (No. 2) 2005

In May 2005 the Act was further amended, with the provisions under that amendment coming into effect from 1 July that year.

The Amendment Act primarily covered:

  • replacing ‘medical misadventure’ with the term ‘treatment injury’, meaning ACC (or the client) no longer had to prove that a health professional had made an error, only that they had been injured during the course of treatment. The change meant ACC no longer had to find fault, which made it consistent with the no-fault nature of the scheme
  • allowing newly self-employed people, or shareholder-employees, to use their wages or salary paid (ie employee earnings) during the 52 weeks before they were injured when calculating weekly compensation levels
  • allowing ACC cover to clients who have a mental injury arising from sexual abuse that occurred before 1974. The changes also opened up cover and entitlements to people who were first treated for mental injury as a result of sexual abuse from 1 July 1992 to 30 June 1999. During this time, the Accident Rehabilitation and Compensation Insurance Act 1992 was in force that excluded these people from cover, and from taking civil action
  • not requiring ACC to backdate entitlements when they restart after a period of non-compliance by a client. ‘Non-compliance’ means a client unreasonably refuses or unreasonably fails to comply with requirements of the Act, to undergo treatment, or to comply with an individual rehabilitation plan

Other actions from the Amendment Act

  • Patient Safety: although not specifically required by the Amendment Act, it lead to ACC establishing a dedicated patient safety function as a means of enhancing the role previously played by the Medical Misadventure unit.
  • Fungi: poisoning from eating mushrooms was added as an injury.
  • Twisting: injuries sustained by twisting were added.
  • Work-related gradual process injuries: a person claiming for a work-related gradual process, disease or infection (such as dermatitis) is not eligible for lump sum compensation if they were first injured, first treated for the injury, last performed the relevant task, or were last in the risky environment before April 2002.

2008: IPRC Amendment Act 2008

The Injury Prevention, Rehabilitation, and Compensation Amendment Act 2008

The Injury Prevention, Rehabilitation, and Compensation Amendment Bill (No.2) passed into law as the Injury Prevention, Rehabilitation, and Compensation Amendment Act 2008 in late June 2008.

Most of its provisions took effect from 1 August 2008, with the exception of provisions that relate to witnessing a traumatic event at the workplace and changes to eligibility for vocational rehabilitation. These came into effect on 1 October 2008. Provisions relating to changes in the determination of minimum weekly earnings came into force on 1 July 2008.

The Amendment Act primarily covered:

  • removing some of the barriers to cover for work-related gradual process diseases and infections. This was primarily by increasing the amount of non-work exposure an affected person is allowed when applying for cover for a work-related gradual process claim. It also clarified that ACC was responsible for investigating whether the client should be covered or not
  • people who experience mental trauma at work and have developed a mental injury. ACC previously only covered mental injury arising from sexual assault or abuse, or because of a physical injury, but now people who see or were close to a severe traumatic event can be covered. However, it must have happened at work
  • clients who self-harm will no longer be barred from entitlements, such as weekly compensation. This amendment does not extend to clients who were disentitled before 1 August 2008
  • nurse practitioners can now assess clients for their ability (or inability) to work and can sign medical certificates. They can also determine the date of injury for work-related gradual process claims
  • the length of time clients can get vocational rehabilitation may now be extended past three years where appropriate, and the age up until which clients are eligible for vocational rehabilitation (previously 65) has been removed
  • occupational assessments now have to take into account a client’s pre-injury earning level when identifying potential employment opportunities
  • the framework around weekly compensation was updated to respond to the changing labour market, and to make the requirements around weekly compensation more reasonable and easy to understand. Most of the changes apply to people between jobs, or seasonal, casual, and minimum wage earners
  • the Amendment Act requires an annual review of the amounts ACC is liable to pay treatment providers, in order to see whether adjustments are necessary to account for changing treatment costs. The Act previously didn’t stipulate a regular review.

2010: The Accident Compensation Amendment Act 2010

The Injury Prevention, Rehabilitation, and Compensation Amendment Bill 2009 (now known as the Accident Compensation Amendment Act 2010) was passed into law on 3 March 2010.

The ACC Minister, Hon Dr Nick Smith, announced that the primary purpose of the Accident Compensation Amendment Act 2010 is to improve flexibility in the Scheme, help contain rising costs to provide value for money services, and encourage closer working relationships between government agencies and ACC.

Key changes in the Accident Compensation Amendment Act 2010

The following provisions came into effect immediately:

  • Provisions relating to the funding of residual claims liabilities
  • The new name of the ACC’s principal Act (now the Accident Compensation Act 2001)
  • The provision enabling ACC to provide non-ACC related government services
  • The provision enabling information-sharing with Inland Revenue
  • The provision requiring ACC to prepare a Financial Conditions Report
  • The provision enabling the motorcycle safety levy.

The rest of the Amendment Act came into force on 1 July 2010.

Further reading

Accident Compensation in New Zealand, Wellington, Brooker’s, 1992 (updated 2001)

Accident compensation: a fairer scheme, W.F. Birch (Wellington: New Zealand Government: 1991)

Compensation for personal injury in New Zealand: report of the Royal Commission of Inquiry. (Woodhouse Report) (Wellington: New Zealand Government: 1967)

Review by Officials Committee of the Accident Compensation Scheme (Wellington: New Zealand Government: August 1986)

Last updated: 24 August 2010

Last reviewed: 13 March 2014