Fresh $1.5 billion deficit leaves ACC $13.8b in the red

Thursday, 9 October 2025

Rising treatment and rehabilitation costs have been a large part of the challenge for the state-owned insurer.

ACC will need to make significant changes, its chief executive says, after the state-owned insurer reported a $1.5 billion deficit for the year to the end of June.

The result adds to a huge $7.2b deficit last year and takes the insurer’s cumulative deficit — the shortfall between the funds it has invested and the expected future cost of current claims — to just over $13.8b.

Chief executive Megan Main said in its annual report, released on Thursday, that rising treatment and rehabilitation costs over the past decade had put pressure on ACC.

“We know that significant changes are required to ensure the scheme is affordable and future generations aren’t paying for our injuries”.

Acting board chairperson David Hunt said ACC had made some progress stabilising rehabilitation outcomes but its directors were under no illusions and there was “still a big mountain to climb”.

“It is acknowledged that ACC cannot achieve the turnaround through its actions alone and other steps will need to be taken to ensure the long-term viability of the scheme,” he said.

Since the report was prepared for publication, Jan Dawson has taken over as board chair.

An accounting change may wipe about $7 billion off ACC’s reported shortfall from next year, but won’t change the underlying nature of its finances.

Up until now, ACC has built a 12.7% safety margin into its estimate of the future cost of meeting its current claims to guard against the possibility that they may cost more than its central forecast.

But it could remove the margin from its forecasts from July next year when it moves to an updated accounting standard, IFRS 17, which gives it more discretion over the risks it needs to account for.

ACC Minister Scott Simpson said in July that the accounting change would not have any implications for the wider work he was doing on a “turnaround plan” for ACC.

He has previously questioned whether ACC might need to offload responsibility for some mental health claims to a different agency to ensure the insurance scheme is sustainable.

That has generated speculation some current insurance entitlements might be replaced by entitlements to benefits with a lesser value.

ACC was a “fundamental part of the fabric of New Zealand society”, he told The Post.

“'I’m determined to continue to see it sustainable and working for New Zealanders in the way that it has done during your lifetime and mine.”

ACC’s performance remained a blot on the wider Crown accounts published on Thursday that the Treasury said showed most key fiscal indicators were “showing some signs of recovery” following a period of sharply rising debt.

Finance Minister Nicola Willis said the Government was continuing its work programme to improve the effectiveness of ACC.

“It has been under-performing,” she said.