Related: ACC Releases Levy Increase Proposals

Q Why are levy increases necessary? A The increasing gap between ACC's assets and liability means levy increases are needed to help bridge the gap. The ACC Board appreciates there's a limit to how much New Zealanders should be expected to pay in ACC levies, and that many will view the prospect of levy increases at this time with dismay. We wish to stress, therefore, that levy increases are not seen as the only answer to the challenges confronting the ACC Scheme - the focus must be on other ways to make the Scheme more sustainable and affordable in the long run.

Q Why don't we defer at least some of these costs - we're only funding the future costs of accidents?

A ACC operates on what's called a 'fully funded' basis. This means each year, we're responsible for collecting enough funds to meet the lifetime costs of all claims we receive that year. The fully funded approach ensures future generations aren't 'burdened' with the injury costs of previous generations - since funds to meet these costs have already been set aside.

The trouble with deferring is that next year there will be accidents that also need to be funded - and so if we don't collect sufficient money each year, it becomes a snow-balling effect.

Q Is it certain that there will be levy increases? A As it does every year when it sets levy rates for the year ahead, ACC is consulting with the public over its proposed levy changes for 2010/11 before the Government makes a final decision. However, given the Scheme's current financial circumstances it is difficult to see how levy increases can be avoided, though the final amount of any increases may differ from those proposed.

Q Why is ACC consulting on a set of levy proposals that may not occur because the Government is planning legislative change? A ACC must propose levy rates based on legislation as it currently stands. However, we are trying to be clear about the impact of proposed legislative amendments on final rates. Q When will new levy increases happen? A ACC will begin consulting on the proposed levy increases today. We will make a recommendation to the Government on levy increases later in the year, and after this the Government will make a final decision on what the rates will be. New levies will take effect from 1 April 2010, except for motor vehicle levies which take effect from1 July 2010.

Q Why do we still need to pay for pre-1999 claims? A Prior to 1 July 1999, ACC operated under a Pay As You Go system. Levies were collected at the start of the year to cover that year's payments for all new and existing claims, but no levies were collected to cover the future cost of these existing claims. However, a number of these claims - particularly where people were seriously injured - continue to have ongoing costs which must be met.

Levies are set with the goal of building up sufficient assets to ensure that pre-1999 claims are fully funded by 30 June 2014 - although proposed legislative amendments could move this out to 2019.

Q What is ACC doing to keep levy costs down? A ACC has launched a range of initiatives aimed at reducing the operational costs of the Scheme including: a new claims 'triage' system, designed to help assess and address the specific rehabilitation needs of clients more promptly and accurately developing programmes to reduce unnecessary time off work after injury new approaches to managing longer-term claims more specialised assistance for those with serious injuries a new model for purchasing services from treatment providers, aimed at achieving better value for money and improved rehabilitation outcomes.

Q. Why are motorcycle levies increasing so much? A The incidence, severity and cost of motorcycle crash injuries are not reflected in the levies. If we charged motorcycle owners for the true cost of injuries, levies for motorcycles would be between $1,200 and $3,700. Motorcycle riders are 16 times more likely to be involved in a road crash than any other road users. Motorcycles are only 3% of New Zealand's vehicle fleet but motorcycle injuries make up 21% of road crash injury claims to ACC The cost of injuries in motorcycle crashes is about four times higher than injuries in other motor vehicle crashes. Q Why are levy rates for people earning a wage or salary increasing significantly? A The Earners' Account has seen a huge rise in liabilities over the past four years from $1.9 billion in 2004/05 to $4.6 billion in 2008/09. That increase has been driven by the growing number and cost of claims for injuries outside the workplace. Most of these happen in the home or at sport. These issues have been compounded by other factors such as: the recession, which has impacted on ACC's investment income falling rehabilitation rates - taking longer to get people back to work or independence after an injury extensions to the ACC Scheme, meaning more people are eligible for assistance from ACC.

Q What is the impact of the earners' levy increase for a family with an average income of $45,000? A On an income of $45,000 the family would have paid $765 for the earners' levy in the 2009/10 year. Under ACC's proposed levies for 2010/11 they would pay $1,260. If the Minister's changes are introduced that figure would be $1,080.