ACC 2017/18 Annual Report media statement

ACC delivering improved services to Kiwis

In 2017/18 ACC delivered significant customer service improvements and reached thousands more Kiwis with injury prevention programmes, ACC Board Chair Dame Paula Rebstock says.

ACC’s Annual Report, released today, shows a net surplus of $28 million for the year ended 30 June 2018.

The result – down from a net surplus of $602 million in 2017 – was mainly due to an increase in the predicted future cost of all existing claims, which has risen $2.9 billion to $40.6 billion. Referred to as ACC’s outstanding claims liability (OCL), the figure has increased due to a fall in long-term interest rates.

Any surplus ACC makes is reinvested back into the Scheme to cover the cost of injuries and ensure New Zealanders pay less in levies.

Investment income grew by $1.5 billion to $3.6 billion taking net investment assets to $40.1 billion. The overall investment return of 9.89 percent made it the 23^rd consecutive year ACC has outperformed its benchmark. ACC invests to ensure Kiwis pay less in levies.

“A highlight for the year had been the successful delivery of a new levy invoicing and customer management system, Juno – a key technology milestone in ACC’s transformation,” Dame Paula says.

“This significantly improves the ACC experience for New Zealand’s 535,000 business customers giving them the ability to register, manage their accounts and pay their invoices online.

“We have also been trialling the first stages of a new approach to case management, which focuses on the individual needs of a client, ensuring they receive the right treatment and rehabilitation services at the right time. We are continuing to refine the model based on feedback from clients and our staff.”

Dame Paula said ACC had received a record number of new claims during 2017/18 – up two percent to 1.98 million. The cost of treatment and rehabilitation services had also increased, with $4.0 billion spent on claims – eight percent more than the previous year.

“We helped more clients return to independence than ever before, and although we did not quite hit our target rehabilitation performance targets, we have a range of initiatives focussed on improving our performance,” Dame Paula says.

“Increased investment in injury prevention programmes – from $55 million to $69 million – and strong partnerships allowed us to reach more than 650,000 New Zealanders with our injury prevention messages. This investment delivered an estimated future claims cost reduction of $1.72 for every dollar we invested – our highest ever.”

ACC’s client satisfaction has gone from 68% in June 2013 to 80% at 30 June 2018. Client, business customer and provider net trust scores all improved during 2017/18, the result of continued hard work to improve the ACC experience for all ACC’s customers.

“However, while our results show positive progress; it is clear we still have much to do to lift day-to-day performance as we didn’t achieve all our targets in rehabilitation, elective surgery and reviews,” Dame Paula says.

“This will be a focus in the year ahead as will improving the service we provide to clients, levy payers, businesses and treatment providers.”

ends

Questions & Answers

This year’s surplus of $28 million is much lower than last year’s surplus of $602 million – why is this?

The surplus reflects a change in the valuation of what we call our outstanding claims liability (OCL). This is the expected lifetime cost of supporting all claims already made.

Because the OCL is future-focused, (out to 2097) it is highly sensitive to external economic factors such as changes to long-term interest rates. Interest rates in 2017/18 fell to historical lows. Put simply, a lower interest rate increase the OCL liability as we expect to earn less income on the dollars we have today. The opposite is true if interest rates increase.

This year, if interest rates were 1% higher, the surplus would have been $5.8 billion; if they had fallen 1%, we would be posting a deficit of $7.6 billion.

For example, if you need $100 in a year’s time and the interest rate was 10%, you would need about $90 today. If the interest rate changed to 1%, you would need about $99 today. The lower the interest rate, the more money you need today to fund future costs.

ACC is sitting on more than $40 billion, much of which isn’t needed for immediate claims costs. Wouldn’t it be better to give that money back to people, and collect it later when you need it?

The major benefit of our full-funding model (which means the levies paid can cover our expected claims) is that Scheme is fair to future generations. In essence, this generation pays for its injury-related costs and doesn’t pass those costs on to future generations.

It also means we earn investment income (2017/18: $3.5 billion) which reduces – or subsidises – the cost of paying for injuries. If ACC didn’t earn investment income, Kiwis would pay more in levies for accident cover.

Why are claims costing 8.2% more this year than last? That’s well above the inflation rate.

Health care inflation tends to rise faster than the standard consumer inflation. There are pressures on our costs as we continue to provide greater levels of care and more advanced products and technologies to support the treatment and rehabilitation of our clients.

Increases in claims volumes also contribute to our increasing costs. New accepted claims rose 2% from last year driven by the strength of economic activity.

Implementing policy and legislative changes can also have an impact on our claims costs.

During 2017/18 some of the key initiatives that impacted our claims costs were: the introduction of the Care and Support Workers Settlement Act, implementing free GP visits for under 13 year olds, continued growth in the provision of services for sensitive claims and improved road ambulance services.

With claims volumes going up, does this mean levies will go up too?

Claims for injuries have increased 6.4% since we last adjusted levies. We are therefore proposing changes, including some increases to levies as people need our support more than ever. More information on the proposed changes and the levy setting process can be found at shapeyouracc.co.nz

Is it acceptable that privacy breaches are still occurring?

This year we changed how we measure privacy breaches to align with guidance provided by the Government Chief Privacy Officer. The new method gives us a better insight into the impact that breaches have on clients and customers.

Our breaches were down 4% on last year which is positive. There were no category 3, 4 or 5 breaches (please see the Privacy section of the Annual Report for more details).

But at the end of the day, a breach is a breach, and we’re trying our best to eliminate them.