ACC agrees to slash spending, get thousands more off benefit

Monday, 30 June 2025

ACC is charting a course to put the growth in its long-term claims pool into reverse as its accumulated financial deficit worsens.

ACC has agreed to a Government request it slashes the growth in claimants receiving compensation for more than a year and cut the money it spends on “social rehabilitation” by at least 5%, or $81 million a year, in future budgets.

Labour ACC spokesperson Camilla Belich said the Government was essentially asking ACC to stop doing its job, describing that as “a disgrace”.

Prime Minister Christopher Luxon said it was just asking ACC to do a better job of rehabilitation.

ACC’s new annual services agreement negotiated with the Government envisages it will increase the number of long-term claimants “returning to independence” by about 1500 a year, to 8610 in the year to June next year.

But it nevertheless makes clear that its financial woes will still deepen in the short term.

The accumulated deficit in ACC’s reserves is expected to increase from $12.4 billion at the end of June last year, when it recorded a mammoth $7.2b annual shortfall, to reach $17.1b by June next year.

That figure represents the gap between the expected future cost of current claims and the savings ACC has built up in its investment fund to pre-pay those costs.

ACC Minister Scott Simpson and Finance Minister Nicola Willis wrote to the state-owned accident insurer in April, voicing disappointment that what they described as a decline in ACC’s performance had not been addressed until recently.

They called on it to “play its part” getting the Government’s books back in order.

Greymouth Mum battles ACC over disabled sons bathroom.

Simpson has also been working on a “turnaround plan” for ACC that has now reached at least draft form and which could see ACC offload responsibilities for some claims related to sexual abuse and mental health.

The services agreement released by ACC today revealed ministers asked ACC to cut the growth in its long-term growth pool — the 24,000-strong pool of claimants who have been on benefits for more than a year — to between 6% and 7% in the year to June next year.

ACC agreed to a figure of 6.6% growth, down from 13.4% growth in the year to March.

It has agreed to attempt to put the increase into reverse from July 2027 by aiming to shrink the long-term claims pool by a total of 13% in the two years to June 2029.

Belich said the Government was asking ACC to turn people away. The flow-on effects of this will be extensive on both claimants and their families, she said.

Luxon said ACC had a difficult job but there had been times in its history when it had been incredibly well led and managed and the Government expected it to manage with the resources it was given.

“We expect performance out of our Crown agencies and make no apology for that.”

ACC itself described the rehabilitation targets as “highly ambitious”, noting in the services agreement that overall ACC claims were continuing to increase and acknowledging it had “limited influence” over challenges to its performance in some areas.

ACC Minister Scott Simpson has previously said ACC is “not trucking along all right”.

In the past it has acknowledged rehabilitation costs are to some extent hostage to rising healthcare costs and longer delays in the health service for patients accessing specialist appointments.

Simpson and Willis called on ACC in their “letter of expectations” to seek a 5% to 10% reduction in the amount it expects to spend in the year to June next year on social rehabilitation, taking the year to the end of this month as the baseline.

Social rehabilitation is the term ACC uses to describe the assistance it provides to help people live independently after an accident, for example by funding help with bathing, toileting and food shopping.

ACC agreed in its services agreement that all entitlements “should only be funded in line with the Accident Compensation Act”, promising in effect not to go beyond its statutory obligations assisting claimants, and committed to consider options to strengthen its “sanctions framework”.

It appeared to accept that its targets could result in declining public satisfaction with the insurer.

ACC’s new goal is to score at least a 57% rating for “public trust and confidence” in its claims management performance in the year to June next year.

That would allow for a 4-percentage-point drop in the 61% “trust and confidence” rating it achieved last year.

Belich said that seemed to be “a clear decision to undermine ACC in the eyes of the public”.